PORTS REGULATOR 2.0 – NEW JURISDICTION, MORE TEETH, BETTER FUNDING

By Norma Wheeler Monday, June 04, 2018
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If passed, the Economic Regulation of Transport Bill (which was published for comment on 12 February 2018) will ring in major changes. We have in the past written about the Ports Regulator whose role is inter alia to oversee the Transnet National Ports Authority (TNPA) and regulate the tariffs imposed by TNPA. The Ports Regulator has no jurisdiction over Transnet Ports Terminals (TPT) (or, indeed, any terminal operators) and some port users have expressed the view that savings made on TNPA tariffs were simply made up by TPT, which sits within the same corporate stable as TNPA. Other long standing issues in respect of the Ports Regulator are lack of funding and insufficient permanent staff. The bill has the potential to resolve these issues and many more.

The bill seeks to establish a new transport regulator (which will subsume the Ports Regulator) and regulate the following entities: TNPA, TPT, Transnet Freight Rail, Transnet Port Terminals, Airports Company of South Africa, Air Traffic and Navigation Services Company, Passenger Rail Agency of South Africa and SANRAL. As will be immediately apparent, the new regulator will regulate parastatals in road, rail, sea and air transport. An interesting development is that the regulator may also regulate private companies in the transport sector. The Transport Minister may determine that a private entity is subject to regulation if it is the sole provider of a service and economic regulation can adequately address the economic consequences resulting from the non-competitive nature of the market. Therefore, for example, if a town only has one privately run bus service, that bus service may be subject to regulation under the bill. This jurisdiction will potentially spread to terminal operators.

The primary form of intended regulation is price control. Each regulated entity would be required to submit a proposal to the regulator requesting approval of its tariffs on services and facilities offered. In determining appropriate price controls the regulator would be enabled to consider relevant factors such as:

  • the regulated entity’s operating efficiency and effectiveness;
  • the need for investment and security of supply in the regulated market;
  • any reasonable cost differentials between the different types of facilities;
  • the likely effect of the proposed price control on the economy, employment, consumers and small or medium enterprises.

When determining price controls for a service, the bill will enable the regulator to attach service standards.

Other contemplated roles of the regulator include:

  • Receiving various information from regulated entities such as statistics related to transport facilities or services it provides or has licensed other parties to provide, forecasts of demand and development plans.
  • Determining certain complaints against regulated entities in respect of issues such as unfair or discriminatory treatment.
  • Investigating complaints, with powers of search and entry.

The powers which stand to be accorded to the new regulator are far wider than those at the disposal of the Ports Regulator, which bodes well for effective regulation. The bill also seeks to establish a Council to be “the primary adjudicative entity, reviewing decisions of the Regulator when an affected party applies for such a review; and reviewing the decisions of regulated entities when a user of a facility or service provided or licensed by a regulated entity considers that its rights have been adversely affected.”

The bill contemplates that the regulator will be funded by an annual fee levied against the regulated entities, who will each contribute according to the proportional cost of regulating each entity. The Ports Regulator is currently funded by Treasury and one of its challenges is lack of funding for initiatives such as an independent valuation of TNPA’s regulated asset base (which plays a role in tariff determination). The funding model proposed in the new bill promises to be effective and sustainable.

The Ports Regulator boasts that over the years it has saved port users over R6 billion, while maintaining the sustainability of TNPA. This begs the question: what would a regulator with enhanced jurisdiction, adequate powers and funding be able to achieve?

This article first appeared in the Sunday Tribune