Development of performance indicators to monitor the effectiveness of the regulatory regime

Performance indicators are essential to help the regulator measure its performance and, through these indicators, help government measure the effectiveness of regulatory regimes for which elected governments are ultimately responsible. This is an area where challenges can be significant, starting with what to measure to attributing causal links and producing data.9 The ACCC, the AER, ERSAR and the ORR have developed performance indicators, whose scope and use can nevertheless vary depending on the reporting requirements, accountability structures and the overall approach to performance measurement.

Similar to all other regulatory agencies and government departments, the ACCC and AER have developed performance indicators under each priority/programme. These indicators are included in the appropriation request - the PBS - submitted by the Treasury to parliament. The Corporate Plan and the AER’s SoI set specific targets for each of these indicators, which are then monitored through the Annual Reports. The AER has specific performance indicators (Box 2.6) and prepares a ‘traffic light report’, highlighting where the AER does not meet performance targets and outlining measures to improve performance.

Box 2.6. AER selected performance indicators

Provide effective network regulation

  • • Number of revenue reset determinations for electricity networks and gas pipelines and distribution networks completed
  • • Percentage of revenue reset determinations for electricity networks and gas pipelines and distribution networks completed within statutory timeframes
  • • Number of annual benchmarking and performance reports for electricity networks
  • • Number of annual tariff approval applications assessed

Build consumer confidence in retail energy markets

  • • Number of retailers’ hardship policies and proposed amendments assessed
  • (externally driven)
  • • Percentage of retailers’ hardship policies and proposed amendments

assessed within 12 weeks of receiving all relevant information

  • • Number of retail authorisations/exemptions assessed (externally driven)
  • • Percentage of retail authorisations/exemptions applications assessed within 12 weeks of receiving all relevant information
  • • Support the timely transfer of affected customers in the event of a retailer failure (externally driven)
  • • Number of formal energy retail enforcement interventions (court proceeding commenced, s. 288 (NERL) undertakings accepted, infringement notices issued) (externally driven)
  • • Percentage of new/replacement offers published on Energy Made Easy website within 48 hours of receipt from retailers

Support efficient wholesale energy markets

  • • Number of quarterly compliance reports on wholesale markets and networks
  • • Percentage of quarterly compliance reports published within six weeks of the end of the quarter
  • • Audit the compliance systems of selected energy businesses, and report on outcomes

Box 2.6. AER selected performance indicators (cent.)

  • • Number of weekly electricity and gas monitoring reports
  • • Percentage of weekly reports published within 12 business days of the end of the relevant week
  • • Number of reports on extreme price events in wholesale electricity and gas markets (externally driven)
  • • Percentage of reports on extreme price events in wholesale electricity and gas markets published within statutory timeframes
  • • Number of targeted reviews of compliance with the national energy rules (as measured by number of reports)
  • • Publish the State of the energy market report

Source: ACCC and AER (2015), “Corporate Plan and Priorities 2015-

https://www.accc.gov.au/publications/corporate-plan-priorities/corporate-plan-priorities-

2015-16 (accessed 24 July 2015).

Starting in July 2015, a Regulator Performance Framework (RPF) assesses Commonwealth entities that have a statutory responsibility to administer, monitor, or enforce regulation against six common performance indicators focusing on good regulatory performance/better regulation to complement the regulator-specific performance indicators (Box 2.7). The six common performance indicators are the following:

  • • regulators do not unnecessarily impede the efficient operation of regulated entities;
  • • communication with regulated entities is clear, targeted and effective;
  • • actions taken by regulators are proportionate to the risk being managed;
  • • compliance and monitoring approaches are streamlined and coordinated;
  • • regulators are open and transparent in their dealings with regulated entities; and
  • • regulators actively contribute to the continuous improvement of regulatory frameworks.

Box 2.7. Australia’s Regulator Performance Framework

Two current governance reform programmes being implemented by the Australian Commonwealth Government (the Commonwealth) are of particular relevance to the issues of accountability and transparency. The Commonwealth Performance Framework is a broad based program aimed at all government departments and agencies while the Regulator Performance Framework (RPF) is aimed at regulators only. The programs are both based in large part on calls from government and other stakeholders for increased accountability and transparency in the operations of government entities.

The ACCC is subject to both performance frameworks. In recognition of specific accountability framework already operating under the COAG Energy Council - which is consistent with the RPF — the AER is subject only to the CPF.

The RPF aims to encourage regulators to minimise their impact on those they regulate while still delivering the vital role they have been asked to perform. Australian government regulators will self-assess their performance against the Framework annually. A number of regulators will be subject to an external review of their performance as part of a three year programme, and a small number of regulators may be subject to an annual external review. External reviews will be conducted by review panels of government and industry representatives to provide further accountability, and provide additional transparency for stakeholders and the community in general. The Framework is based on a report by the Productivity Commission and was developed in consultation with regulators and stakeholders. The Framework will apply from 1 July 2015.

Source: Chapter 3 of the current report.

The ORR is subject to less stringent requirements in terms of performance indicators as outcomes are not subject to any agreement between the regulators and ministers or parliament. The ORR recognises the difficulties in tracking performance, reflecting to a large extent the fact that a significant aspect of the regulator’s work is to ensure the prevention of harm, which is difficult to measure. The ORR does nevertheless track data that help follow market and industry developments and guide regulatory decisions (beside ex ante and ex post assessment of major regulatory decisions). For example, it has developed a Public Performance Measure (PPM) that forms part of Network Rail’s regulatory outputs, which measures the punctuality of passenger trains, and is presented along with data on safety and investment in a clear format in ORR’s Annual Report (Figure 2.2).

Figure 2.2. Tracking industry performance at ORR

Source ORR (2015), “Annual Report and Accounts 2014-15”,

http://orr.gov.uk/ data/assets/pdf file/0019/18154/annual-report-2014-15-web.pdf, p. 38. (accessed 24 July 2015).

Since 2004, ERSAR has been tracking a set of performance indicators on the quality of the service provided by operators. This set of indicators is used to assess the evolution in the sector in terms of the quality that is provided to the users. In 2009, the set of indicators was revised and enhanced to improve the assessment of the quality of the service provided by operators.

 
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