Newcastle road hump to privatisation free for all

By: Rob McKay

ACCC holds off hefty hike in service fee but appeal looms

Newcastle road hump to privatisation free for all
Cristina Cifuentes


Glencore has won an initial victory in its effort to divert a Port of Newcastle effort to help recoup its lease purchase cost through unilateral service charge hikes.

The port lease-holder, however, looks set to fight the Australian Competition and Consumer Commission (ACCC) decision by appealing to the Australian Competition Tribunal (ACT) and leaving open the option of court action, according to a report in The Australian.

The outcome is a setback, though relatively minor, for a model whereby states sell infrastructure leases at inflated prices and then ignore the buyers’ resultant behaviour – with costs often kicked down to those least able to resist, such as container haulage companies and, later, consumers.

But the implications appear to have spooked the leaseholder and may spook others elsewhere.

In the case of Glencore, an firm big enough to carry the fight, and its Glencore Coal Assets Australia subsidiary, the ACCC has arbitrated a 20 per cent reduction of Port of Newcastle Operations’ (PNO’s) for Glencore coal carrying ships accessing the ‘declared’ shipping channel service to $0.61 per gross tonne (GT).

In January 2015, PNO increased the charge for coal ships entering the port by about 40 per cent to $0.69 per GT.

In November 2016, Glencore notified the ACCC of a dispute with PNO about the price increase and requested the ACCC to arbitrate. Since then, PNO has increased the charge to its current 2018 price of $0.76 per GT. 

Read how Glencore’s appeal was aimed at facility operators' charging behaviour, here

In the course of the arbitration, PNO argued that this year’s charge should rise to $1.36 per GT, while Glencore said it should fall to $0.41 per GT, the ACCC says.

Though ACCC chairman Rod Sims has publically criticised state governments’ privatisation strategies for discounting negative repercussions but the ACCC says its "main task" was to establish "the value of assets used to provide the ‘declared’ shipping channel service.

"Charges for ships entering the port were then derived from this valuation."

A key part of the dispute was whether PNO should be able to charge for dredging of the shipping channel that had been undertaken or funded by users of the port.

The ACCC says it excluded these user funded amounts from the costs that PNO could recover and determined Glencore should pay a lower price, backdated to 2016.

"PNO proposed large increases to the current price, but the ACCC found that a reduction in the price for using the shipping channel was appropriate," ACCC commissioner Cristina Cifuentes says.

"The ACCC also determined appropriate mechanisms for future price changes, and decided on certain non-price terms and conditions of access where the parties had been unable to reach an agreement."

The ACCC’s arbitrated terms and conditions of access are operative until the ‘declaration’ of the shipping channel service at the port expires on July 7, 2031.

The ACCC can arbitrate access disputes for services which have been "declared" under Part IIIA of the federal Competition and Consumer Act 2010.

The shipping channel service at the port, defined as "the provision of the right to access and use the shipping channels (including berths next to wharves as part of the channels) at the Port, by virtue of which vessels may enter a Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct", was declared under Part IIIA by the Australian Competition Tribunal on June 16, 2016.

Comment from the port operating company has been sought.


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