Economic Regulation Authority (Licensing Funding) Regulations 2014

Licence means any of the eight classes of licence defined by cross reference to the industry Acts: electricity distribution, generation, retail, transmission, integrated regional, gas distribution, gas trading, and water services licence. An integrated regional licence is treated as separate licences for each activity it authorises, so a single instrument may give rise to multiple charges under the annual and standing charge provisions.

Specific charges are payable by an applicant when the Authority performs a listed function: dealing with an application for grant, renewal, amendment, or transfer of a licence under any of the three industry Acts. The charge equals the Authority’s directly attributable costs, including consultants, travel, publishing, public consultation, and map production. There is no fixed dollar amount; the charge is whatever the Authority actually spent.

Annual licence charges are fixed amounts prescribed in regulation 6(2). They vary by licence class: for example, an electricity retail licence costs $3,416 per year, a gas trading licence $3,105, a water services licence $2,885, and an electricity distribution licence $2,732. Payment is due one month after grant and annually on each anniversary.

Standing charges are the most complex. They are levied each quarter to recover core function costs, which are the Authority’s licensing costs not already recovered through specific or annual charges. The charge is calculated by taking the core function costs for the quarter attributable to a particular industry Act, multiplying by a fixed percentage for the relevant licence class (e.g. 25% for electricity licences, 50% for gas licences, 100% for water services licences), then apportioning that amount among licensees according to the number of units each reported in the preceding financial year. Units are different for each class: kilometres of distribution line, megawatts of generation capacity, number of customers, or kilometres of transmission line. If a licence was granted after the last financial year, the units in the licence itself are used. The charge is reduced proportionally if the licence was held for only part of the quarter, and the shortfall is reallocated to other licensees of the same class.

Prescribed rate for interest on late payments is 5 percentage points above the Reuters Screen BBSW one-month bank bill reference rate at 10 a.m. Sydney time on the first day after the allowed period. If no rate is quoted, the Authority determines the rate by reference to comparable indices.

Quarter is the standard calendar quarter ending on 30 September, 31 December, 31 March, or 30 June. The Authority assesses the standing charge as soon as practicable after each quarter and issues a notice of assessment.

The regulations directly affect two categories of persons: licensees (the persons who hold a licence under the three industry Acts) and applicants for licences or certain licence variations. Licensees are liable for both annual licence charges and standing charges. Applicants are liable for specific charges when the Authority performs a listed function for them. The class of potential applicants includes existing licensees seeking renewal, amendment, or transfer approval, as well as new entrants wanting to obtain a licence.

The electricity sector is the most heavily represented: five licence classes (distribution, generation, retail, transmission, integrated regional) are captured. The gas sector contributes two classes (distribution and trading). The water services sector has one licence class. Entities that hold multiple licences across sectors or within a sector face cumulative charges. For instance, an integrated regional licence is treated as multiple licences, so a holder of one such licence may be liable for annual and standing charges for each separate activity (e.g. generation and retail).

The Authority itself is affected in a different way: it must administer the charge regime, send assessments, provide itemised accounts, give estimates on request, and carry out the mandatory cost reviews. Its annual report under the Financial Management Act 2006 must disclose total specific and standing charges paid or payable by each licensee, which imposes a transparency obligation.

The Minister and Treasurer have a joint discretionary power to exempt a person from paying charges. This power is not circumscribed by criteria, so it introduces a political element: the government may choose to relieve a particular entity from costs that other licensees must bear.

Indirectly, consumers of electricity, gas, and water services are affected because the charges form part of the regulatory costs that licensees must recover through tariffs and prices. For contestable markets, this cost may be passed through in wholesale or retail prices; for regulated monopolies (especially the natural monopoly networks), it is likely included in the regulated asset base or operating expenditure allowances. The ultimate incidence falls on households and businesses in Western Australia.

Smaller licensees with few customers or short line lengths face a proportionally lower standing charge because the formula apportions core function costs based on units, but they still pay the fixed annual licence charge regardless of size. New entrants face the specific charge risk before they have any revenue.

Duties:

• Licensee must pay annual licence charges within one month after grant and within one month after each anniversary of that day (reg 6(3)). Failure attracts interest and debt recovery.
• Licensee must pay standing charges within 30 days after the notice of assessment is issued (reg 8(2)). The Authority assesses the charge quarterly.
• Applicant must pay specific charges within 30 days after the Authority issues the notice specifying the amount (reg 4(4)).
• The Authority must give an itemised account of the costs covered by a specific charge if the applicant requests it (reg 4(7)). It must also give a written explanation of how core function costs were calculated for a standing charge if the licensee requests (reg 8(4)).
• The Authority must give an estimate of a specific charge if requested before an application and if sufficient information exists, within 7 days (reg 5(2)). However, the estimate is not binding on the Authority (reg 5(3)).
• The Authority must carry out reviews: it must review its costs and the sufficiency of charges and report to the Minister by 1 January 2020 and then every three years after the first report (reg 13).

Rights:

• Applicant may request an estimate of the specific charge for a proposed application before lodging it (reg 5(1)).
• Applicant may request an itemised account of specific charge costs (reg 4(7)).
• Licensee may request a written explanation of how core function costs were calculated for a standing charge (reg 8(4)).
• Licensee or applicant may seek an extension of time to pay a charge from the Authority, which may grant it if satisfied it is appropriate (reg 11). No criteria are stated - this is a discretionary power.
• Any person may be exempted from charge liability by the Minister with the Treasurer’s concurrence for a specified or indefinite period (reg 10). The regulation gives no right to apply; it is purely at the Minister’s initiative.
• The Authority may recover unpaid amounts as a debt in court, using a chairman’s certificate as prima facie evidence (reg 9). This is a right of the Authority, not of the licensee.

These duties and rights create a one-sided relationship in practice. The Authority controls the assessment of costs, the calculation of core function costs (which are not defined in great detail), and the timing of notices. The licensee’s main right is to seek information after the fact; there is no right to challenge the quantum before payment except by refusing and forcing debt proceedings, which carries interest risk.

The regulations create no criminal penalties or infringement notices. Enforcement is purely civil, through debt recovery and interest.

Interest on late payments: If any charge (specific, annual, or standing) is not paid in full within the allowed period, interest accrues on the outstanding amount at the prescribed rate, calculated daily (reg 4(8), 6(4), 8(3)). The prescribed rate is 5 percentage points above the one-month BBSW rate quoted on Reuters Screen BBSW at 10 a.m. Sydney time on the first day after the allowed period, or if no quote exists, a rate determined by the Authority by reference to comparable indices (reg 3(1) definition of ‘prescribed rate’). This rate is punitive: the contemporaneous BBSW rate plus 500 basis points is far above commercial borrowing costs for large utilities, so it penalises delay heavily.

Debt recovery: The Authority may recover any unpaid charge plus accrued interest as a debt due in a court of competent jurisdiction (reg 9(1)). In proceedings, a certificate signed by the Authority’s chairman stating the amount, the interest, the liable person, and that it is unpaid is sufficient evidence of those matters without proof of the chairman’s appointment or signature (reg 9(2)). This effectively shifts the evidentiary burden to the defendant licensee, who would need to rebut the certificate’s content.

No remedial period: There is no statutory grace period beyond the allowed time (30 days for specific and standing charges; one month for annual charges). Interest runs from the first day after the allowed period ends. The Authority may extend the period under reg 11, but that is discretionary and not a right.

No compounding or additional fees: The regulations do not mention late payment fees, recovery costs, or compounding of interest. The interest is simple daily interest at the prescribed rate, which is already high.

No criminal or disciplinary action: The Authority cannot suspend or revoke a licence for non-payment of charges under these regulations; any such consequence would have to arise under the industry Acts, which these regulations do not amend. However, persistent non-payment could lead to debt proceedings and potentially insolvency risk for smaller licensees.

The enforcement design relies on the deterrent effect of a high default interest rate and the efficiency of the chairman’s certificate as evidence. It favours the Authority as a creditor and imposes a real cost on licensees that dispute charges or have cash flow difficulties.

These regulations are made under the Economic Regulation Authority Act 2003 and are part of a broader legislative framework for the regulation of energy and water in Western Australia. They do not create the licensing regimes themselves; they only provide the funding mechanism for the Authority’s licensing functions.

Primary industry Acts:

• Electricity Industry Act 2004 Part 2 - this is the source of the Authority’s functions regarding electricity licences. The regulations reference it for definitions of licence types and for identifying the functions that trigger specific charges (applications for grant, renewal, amendment, or transfer of electricity licences). The annual report requirement under reg 12 applies to charges paid under that Act.
• Energy Coordination Act 1994 Part 2A - covers gas licences (distribution and trading). The regulations incorporate the definitions and function references from that Act. Standing charge percentages for gas licences are set at 50%, reflecting a different cost allocation approach compared to electricity.
• Water Services Act 2012 Part 2 - covers water services licences. The regulations give water services licences a unique 100% allocation of core function costs for their sector. Note that water services licenses do not have a subclass in the standing charge table; only one class exists.

Financial reporting law: Regulation 12 requires the Authority’s annual report under the Financial Management Act 2006 section 61 to include details of total specific and standing charges paid or payable by each licensee. This ensures parliamentary and public transparency, but note that annual licence charges are not required to be separately disclosed; only specific and standing charges are listed.

No interaction with competition law, tax law, or consumer protection law is mentioned in the regulations. The charges are not taxes for income tax purposes (they are regulatory charges for services) but may be deductible expenses for the licensee.

Relationship with other charge regimes: The regulations are exclusive for the Authority’s licensing functions. The Authority may also have other functions (e.g., pricing inquiries, monitoring) that are funded separately under other instruments. Core function costs are defined as those licensing costs not recovered through specific or annual charges - meaning annual charges are intended to cover some baseline, specific charges cover direct application costs, and standing charges cover the residual.

Interaction with state budget processes: Because the charges are paid directly to the Authority and not into consolidated revenue, the Authority is presumably a self-funding body for licensing purposes. The exemption power given to the Minister and Treasurer allows the government to waive costs for a particular entity, which could be used for policy reasons but may distort competition between exempt and non-exempt licensees.

Review requirement: The mandatory review under reg 13 requires the Authority to examine the sufficiency of charges and its own costs. This review feeds into possible future amendments to the regulations but does not interact directly with any other legislation.

Based on the compilation table provided, these regulations were gazetted on 30 December 2014 (pages 5479-94). Regulations 1 and 2 commenced on that date; the substantive regulations commenced on 1 January 2015. The compilation table shows no amendment entries. The regulations have been in force for over nine years as at the time of writing (early 2025) with no recorded amendments in the compilation. The note states that the compilation includes only those regulations and no later amendments.

This absence of amendment history is notable. The fixed annual licence charges set out in reg 6(2) have not been indexed or varied since 2015. Inflation over that period would have eroded the real value of those charges, meaning the proportion of total costs recovered through annual charges has declined in real terms, potentially increasing the reliance on standing charges (which track actual core function costs). The mandatory review process under reg 13 should have identified this; the first review report was due by 1 January 2020. Whether that report was completed and what it recommended is not disclosed in the regulations. If the charges have not been updated following the review, it suggests either the Authority decided they were adequate or the review process has not produced regulatory change.

The standing charge formula uses percentages that remain static. Without amendment, the cost allocation structure for electricity (25%), gas (50%), and water (100%) has not been recalibrated. This may reflect a deliberate policy or simply regulatory inertia.

The source text contains no reference to any litigation. There are no court cases, tribunal decisions, or dispute resolution mechanisms mentioned in the regulations. Because the regulations are procedural and deal with cost recovery, litigation would typically arise only if a licensee refused to pay and the Authority brought debt recovery proceedings, or if a licensee sought judicial review of a charge assessment.

Given the regulations have been in force since 2015, it is plausible that some disputes have occurred but they have not resulted in published judgments that amend the regulatory text. The lack of any annotation or cross reference in the compilation table suggests there are no known court rulings that have interpreted the regulations in a way that required amendment.

Without independent research, it is not possible to state whether any litigation has occurred; the source does not name any cases. Therefore, this section must be limited to noting that the regulations do not mention any litigation and no case law is incorporated into the text.

That said, the nature of the charges could give rise to challenges. The specific charges are cost recovery with no cap; larger applications (e.g., for a major transmission line) could incur substantial costs, potentially leading to disputes over what costs are “directly attributable” or “necessary or convenient.” Similarly, the standing charge formula allows the Authority to determine core function costs without external audit; a licensee might challenge the reasonableness of those costs, but the regulations provide only a right to a written explanation, not a right of review or appeal. Any litigation would likely be in the Supreme Court of Western Australia under administrative law principles.

1. The estimate is not binding. Regulation 5(3) explicitly states the Authority is not bound by an estimate it gives. An applicant who budgets based on an estimate and then receives a higher charge cannot argue estoppel or legitimate expectation. The only recourse is to request an itemised account after the fact (reg 4(7)) and then decide whether to pay or litigate.

2. Integrated regional licences are multiple licences. Regulation 3(2) deems an integrated regional licence to be separate licences for each activity it authorises (generation, transmission, distribution, retail). This means a holder of one integrated regional licence pays multiple annual licence charges (e.g., if it authorises all four activities, four annual charges) and multiple standing charges, each calculated on the relevant units for each activity. This can substantially increase the total funding obligation for regional integrated utilities.

3. Standing charge reallocation when a licence enters or exits during a quarter. Under reg 7(5) and (6), if a licence is granted or ceases during a quarter, the charge for that licence is reduced proportionally, but the shortfall is then reallocated to other licensees of the same class holding licences for the whole quarter. This means existing licensees absorb the cost of new entrants’ partial quarter and departures. It creates an unpredictable quarterly variation in charges unrelated to the licensee’s own units.

4. Interest rate is high and uses BBSW. The prescribed rate is BBSW + 5%. If BBSW is, say, 4%, the interest rate is 9% per annum, calculated daily. For a large outstanding charge, interest can accumulate quickly. Note that if no BBSW quote is available on the relevant day, the Authority determines the rate itself, introducing discretion.

5. Core function costs are a residual black box. Core function costs are defined as costs incurred in licensing functions that “cannot be recovered through the imposition of specific charges or annual licence charges.” There is no definition of what costs are ‘recoverable’ through those channels, leaving the Authority to allocate costs between specific, annual, and standing categories. A licensee has a right to a written explanation (reg 8(4)) but no right to challenge the allocation.

6. No objection or appeal right. The regulations provide no internal review, no objection process, and no right to appeal a charge to a tribunal or court. The only remedy is to not pay and force the Authority to bring debt proceedings, which then risk the high interest rate and the evidentiary weight of the chairman’s certificate.

7. Exemption is purely discretionary and with no criteria. The Minister may exempt with the Treasurer’s concurrence. There is no application process, no right to apply, and no criteria. This creates potential for uneven treatment: a politically connected entity may receive an exemption while a competitor does not.

8. No indexation of annual licence charges. The fixed amounts in reg 6(2) have not changed since 2015. Over time, inflation erodes their real value. This means the annual charge component declines, pushing more cost onto the standing charge, which is based on actual core function costs and thus rises with inflation and Authority spending. The burden shifts from a fixed, predictable amount to a variable quarterly charge.

9. Units used are from the preceding financial year. The standing charge for a quarter uses units reported in the financial year immediately preceding the quarter (reg 7(4)). If a licensee’s business changes significantly (e.g., acquires new customers or builds new line length) in the current financial year, the standing charge will lag by up to one year. This can lead to under or over recovery, but the adjustment only happens after the next year’s reporting.

10. First review deadline passed without visible action. The Authority was required to give a written report before 1 January 2020. It is now 2025. If the review was not completed, the Authority is in breach of its statutory duty, but the regulations do not provide a consequence. If it was completed, the charges have not been amended. Either way, this weakens the cost-check mechanism.

11. Annual licence charges are payable within one month of grant, even before the licensee earns any revenue. New entrants must budget for these charges at a time when they have no income from the licence, creating a cash flow hurdle.

12. The standing charge formula uses a percentage for each class, but these percentages appear arbitrary. For example, why is gas distribution and trading at 50% while electricity licences are at 25% each? Water services is at 100% alone. The regulations give no rationale. A licensee in a 50% class bears twice the proportional burden of a 25% class, regardless of actual cost causation.

Step 1: Identify all licences held and correctly classify. Determine whether any licence is an integrated regional licence; if so, treat each activity as a separate licence for charge purposes. For gas distribution or trading, confirm which subclass applies; for water services, there is only one class. Keep records of the relevant units (kilometres of line or pipeline, megawatts of capacity, number of customers) as at the end of each financial year, as these will be used for the standing charge calculation for the following four quarters.

Step 2: Budget for annual licence charges. For each licence, pay the fixed amount shown in regulation 6(2) within one month of the date of grant and within one month of each anniversary. Set up calendar reminders. If the business holds multiple licences, add the amounts. Note that these amounts have not changed since 2015, but confirm whether any amendment has occurred by checking the current compilation.

Step 3: Manage specific charges for applications. Before lodging an application for grant, renewal, amendment, or transfer of a licence, request an estimate under regulation 5. Understand that the estimate is not binding, so budget conservatively. After the Authority performs the function and issues a notice of the charge, pay within 30 days. Request an itemised account under regulation 4(7) if the amount seems high; this may identify errors or excessive costs. Build the expected charge into the project cost for new licence applications.

Step 4: Prepare for standing charges. The Authority will assess and issue notices quarterly. Pay within 30 days of the notice date. Ensure that the Authority has correct records of your units (customers, km of line, MW capacity) as reported in the previous financial year. If the licence was granted after 30 June of the preceding year, the units in the licence itself will be used; ensure those figures are accurate. If you request a written explanation of core function costs under regulation 8(4), do so early to allow time to scrutinise before payment is due.

Step 5: Monitor and challenge assessments. Because there is no formal appeal process, the only avenue for dispute is to pay under protest (to avoid interest) and seek redress, or withhold payment and face debt proceedings. The latter is high risk because of the chairman’s certificate and daily interest. Consider seeking an extension under regulation 11 if a payment deadline is problematic; although discretionary, it may avoid interest. Alternatively, approach the Minister for an exemption under regulation 10 if the charge imposes an unusual hardship.

Step 6: Keep records of charges paid. The Authority’s annual report must include total specific and standing charges paid or payable by each licensee. Cross check that the Authority’s reported figures match your own payments. Any discrepancy could lead to future disputes or double charging.

Step 7: Track review reports. Although the first review was due by 1 January 2020, stay alert to subsequent reports. The reports may propose changes to charge levels or allocation percentages. Engage in any consultation processes the Authority conducts; the cost allocation is ultimately a political and regulatory decision that affects your profit margins.

Step 8: For new entrants, budget before revenue. Include the annual licence charge for the first year, the specific charge for the application (estimate plus a buffer), and the standing charges for the first quarters (which will be based on units in the licence). Cash flow planning is essential because no revenue flows until the licence is granted and operations commence.

Step 9: Handle integrated regional licences carefully. Treat each activity as a separate licence. That means separate annual charges (add $2,406 for each activity except retail at $3,416) and separate standing charge calculations for each activity subclass. The deemed division is not optional; it is mandated by regulation 3(2). Failure to account for all four activities could lead to underpayment and interest.

Step 10: Liaise with the Authority about definitions. Core function costs are defined by reference to costs “incurred by the Authority” in connection with licensing functions. The line between core function costs and costs recovered by other charges is not drawn in the regulations. Engage with the Authority to understand its cost allocation methodology and, if necessary, raise questions through the written explanation mechanism. Proactive engagement is better than reactive dispute.