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The Singapore Energy Market Authority (EMA) has completed a review of the vesting contract regime in Singapore and released the final report.

The EMA implemented the vesting contract (“VC”) regime on 1 January 2004. The objective of the VC regime is to mitigate the exercise of market power by the generation companies. Frontier Economics (Asia-Pacific) was engaged to undertake the review on behalf of the EMA.

The review examined the mechanisms used to mitigate market power in the Singapore Wholesale Electricity Market (SWEM), including:

Frontier’s draft report Review of the Vesting Contracts Regime (the draft report) was released on May 16, 2016. EMA received submissions commenting on the draft report from a range of interested parties. The revised report was released on August 31, 2016 in conjunction with the EMA’s draft determination. A second round of submissions were made in response to the revised report.

The final report discusses the comments raised in both rounds of submissions and Frontier's response to the comments. Frontier's recommendation to phase out vesting contracts in several stages was adopted by EMA.

Frontier regularly advises clients, including regulators, on market modelling and market arrangements in the electricity sector across the Asia-Pacific.

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The New South Wales Independent Pricing and Regulatory Tribunal (IPART) has released the results of its 2015 Household Survey. This was the seventh household survey since 1993 about energy and water consumption across 4,000 houses in New South Wales. The survey was undertaken by Roy Morgan Research in the Sydney, Gosford, Hunter, the Riverina, and the North Coast regions. It obtained information regarding each household’s demographics, appliance stock, how they used energy and water, and a number of other characteristics related to energy and water consumption. Roy Morgan also collected information from network providers on the household’s electricity, gas and water consumption.

IPART regulates aspects of the water and energy sector across NSW. For example, it determines the maximum prices that can be charged for bulk and retail water services provided by major water utilities across NSW and sets the maximum prices gas retailers can charge customers who have not signed a market contact. It also recommends a benchmark range for unsubsidised solar feed-in tariffs that retailers may voluntarily offer customers, and has a role in monitoring competition in the retail electricity market. A sound understanding of the nature of water and energy usage across different households helps to provide a context for its decisions.

Frontier (Asia-Pacific) was engaged by IPART to use the survey data to investigate the determinants of the levels and patterns of household energy and water consumption in NSW.  Frontier used a range of analytical tools, including econometric regression analysis and behavioural insights, to investigate the drivers of energy and water consumption, as well as the underlying relationships between total energy consumption and a range of social and economic characteristics. Understanding these relationships  is critical in informing energy decision-making.

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The Australian Competition and Consumer Commission (ACCC) has announced it will not oppose Seven West Media’s (SWM) proposed acquisition of The Sunday Times and from News Limited (News).

SWM and News are national media providers of both print and online media nationally and across various jurisdictions in Australia. In Western Australia (WA), SWM supplies The West AustralianThe Weekend West and, among other media assets, and News supplies The Sunday Times and

The ACCC’s review predominantly focused on WA specific news media and considered the likely effects of the proposed acquisition in three markets:

On the supply to readers/consumers; the ACCC found that, while information suggested News and SWM were close competitors, a sufficient range of news choices would remain available to Western Australians. Further they examined and had regard to the declining readership of print media in the face of competition from online news sources.

On the supply of advertising opportunities; for many categories of advertising the ACCC reports that the role of print media has become less important given the rise in online media prevalence and the ability of advertisers to substitute away from print media, however, they identify that there are some categories for which print media remains of high value. Regardless, the ACCC reports that even the concerned advertisers were able to identify substitutes, if in the event that SWM decided to increase prices post acquisition.

The ACCC also concluded that the removal of a single customer was unlikely to adversely affect competition in related to the acquisition of news content.

Frontier (Asia-Pacific) advised the lawyers acting for News in relation to patterns of substitution between different advertising media.

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The Victorian state government announced that the Lonsdale Consortium was the successful bidder for the 50-year lease for the commercial operations of the Port of Melbourne.  The port is the largest cargo and container port in Australia, with over 3,000 ships visiting each year. The announced lease price was $9.7 billion, well in excess of earlier forecasts.

While the Lonsdale Consortium will be responsible for improving and managing the operation of the port, the government will continue to regulate various aspects of the port.  Victoria’s independent economic regulator, the Essential Services Commission (ESC), will oversee an enhanced regulatory regime to provide some assurance to port users.

The regulatory regime, as implemented through a ‘Pricing Order‘ and the Ports Management Act, has a number of unusual features. This includes provisions that control prices for the first 15-20 years of the lease. Annual tariff increases will be capped at CPI through this period. In addition to this control, the Consortium will have to comply with a requirement to set an annual revenue requirement based on a ‘building block model’. While the ESC does not set or approve the inputs into the model, at defined review points it may make findings that the Port Licence Holder is not complying with Pricing Order; a finding of significant and sustained non-compliance could then trigger a range of remedies or further investigations.

Frontier (Asia-Pacific) is advising the ESC on the implementation of the new regulatory regime applying to the port.

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