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After 16 years as the inaugural Chairman of Frontier (Australia), Dr. Philip Williams has stepped down from the position. Professor Stephen Gray has been appointed as Frontier’s new Chairman.  Stephen joined Frontier Economics as a Director in late 2014. He is a Professor of Finance at the University of Queensland’s Business School and a recognised expert consultant and researcher in the areas of valuation, cost of capital, corporate financial strategy, financial modelling, financial risk management and the creation of shareholder value.

Philip Williams will continue to be a key member of Frontier Economics in his role as Director of Legal and Competition.

The new Chairman is part of a broader change to the governance of Frontier (Australia) with the recent introduction of four new directors. Frontier’s Managing Director, Danny Price, said: “I am excited by the addition of new Board members and the company’s new Chairman, and wish to thank Philip for his many years of service to the company.”

For more information, please contact m.okeefe@frontier-economics.com.au.au.au, or phone +61 3 9620 4488.

A new article by Mike Woolston of Frontier (Australia), published in the February 2015 edition of the Australian Water Association’s Water Journal, looks at the issue of funding water infrastructure.

Noting that privatisation of assets is more common in other sectors, the article asks whether private finance should play a bigger role in financing water infrastructure in Australia. While there is not a demonstrable gap in infrastructure funding, what is apparent is a level of inefficiency in water infrastructure investments, often reflecting political priorities of governments. How could greater private sector involvement help? The article follows up with possible options for private financing and identifies the prerequisite for this to occur.

Frontier (Australia) regularly advises on water sector economics in the region.

For more information, please contact m.okeefe@frontier-economics.com.au.au.au, or phone +61 3 9620 4488.

During the New South Wales election debate on Friday 13 March 2015, the Opposition Leader, Mr Luke Foley, implied that a Frontier Economics analysis supported his view that privatisation results in higher network prices.

Frontier Economics’ Managing Director, Mr Danny Price said that “our analysis showed the opposite to what Mr Foley implied on Friday”.

“We found that privatisation will benefit consumers with lower prices compared to retaining government ownership. The reason is that the private sector does not waste resources in providing services to its customers”.

Mr Foley has confused comparisons between the price performance of privatised and government owned networks by mixing concepts of price rises and price levels.

The level of retail electricity prices in each state varied prior to privatisation. Victoria and South Australia initially had higher prices. The Frontier Economics analysis clearly shows the difference between government owned and privatised networks – government-owned networks have experienced the highest network price rises and the privatised networks achieved the smallest rises in network prices.

Putting to one side the flawed price comparisons, Mr Price noted the principal point of Frontier’s report for the NSW Government was to review the arrangements for regulating electricity network prices.

“Our conclusion was that the regulatory arrangements for setting network prices will apply in the same way regardless of whether the NSW network businesses are government owned or leased to the private sector. In other words, NSW consumers will benefit from the same pricing protections regardless of whether the businesses are leased to the private sector.”

The Frontier Economics report for the NSW Department of Premier and Cabinet is available here.
For more information, please contact danny.price@frontier-economics.com.au or phone +61 3 9620 4488.

The Australian Water Association (AWA) today published an article in the February 2015 edition of the Water Journal, rounding up issues behind the visit of a delegation of water professionals to California last December. Dave Appels from Frontier (Australia) participated in the delegation, which was co-led by the Hon Simon Birmingham and AWA President Graham Dooley.

The delegation was in response to an invitation from Governor Jerry Brown, in response to the severe drought gripping the state of California. The focus of the tour was on lessons learned in Australia and suggestions and innovative solutions for California’s water sector. Stops on the tour included Los Angeles, San Diego and Sacramento, with meetings arranged with a range of public and private bodies.

Frontier (Australia) regularly advises public and private sector organisations on water sector economics.

For more information, please contact m.o.keeffe@frontier-economics.com.au, or phone +61 3 9620 4488.

The Australian Competition and Consumer Commission (ACCC) has issued its draft decision on the prices that other operators pay Telstra to use its copper network to provide telecommunications services to consumers.

The draft decision, covering the period from 1st July 2015 to 30th June 2019, is for a one-off uniform fall in access prices of 0.7 per cent for the seven access services. This compares with a one-off price increase of 7.2 per cent covering the same period that Telstra had sought in October 2014.

This draft decision covers the first ‘reset’ of the changed regulatory framework that was implemented in 2011. The ACCC has also addressed a number of key issues with the structural decline of the copper network, as the national broadband network (NBN) is replacing Telstra’s legacy network as the infrastructure by which Australians receive fixed line voice and broadband communications.

Frontier (Australia) has advised access seekers to Telstra’s network through the course of the review. These submissions have covered reviews of Telstra’s cost and demand forecasts, and approaches to dealing with the NBN transition.

For more information, please contact m.okeeffe@frontier-economics.com.au, or phone +61 3 9620 4488.

 

Frontier (Australia) today published a report prepared for a broad coalition of National Electricity Market (NEM) participants on the Optional Firm Access (OFA) proposal from the Australian Energy Market Commission (AEMC).

OFA was devised both to improve the economic efficiency of generation dispatch and to promote more locationally-efficient generation and transmission investment decisions. However, Frontier’s analysis of the AEMC’s proposal finds that not only are the costs of congestion in the NEM immaterial, but that OFA would greatly centralise the planning and control of new investment –  the very opposite of what it seeks to achieve.

Frontier’s study also finds that customers would be paying for the development and operation of the new scheme one way or another.  Additional costs and complexity imposed on the generators would send an additional 5,500 megawatts of capacity broke.  This loss of capacity would raise wholesale prices, which are likely to get passed on to consumers.

In addition, Frontier’s analysis of the prototype access rights pricing model developed by the AEMC reveals that the model produces anomalous and inconsistent results.

Overall, the Frontier report points out that the introduction of OFA represents the most significant change to the wholesale energy market since the inception of the NEM and is a step towards greater complexity and centralisation. The proposal would reduce the transparency of the NEM as a whole.

Danny Price, managing director of Frontier (Australia) and leader of the firm's energy practice said, “It’s hard to understand why the Commission would promote a scheme that seeks to solve a problem that doesn’t exist, that will result in more complexity and costs for the industry and that will ultimately drive consumer prices higher”.

Frontier (Australia) regularly advises participants and regulators on the operation of the NEM.

 

For more information, please contact Rajat Sood at rajat.sood@frontier-economics.com.au or phone +61 3 9613 1505.

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