Rising utility prices are a source of concern and outrage for Australian consumers, leading experts to look at ways to keep the system honest.

New research from the Monash Business Policy Forum argues that generators, retailers and consumers should be able to negotiate deals with energy, telecommunications and water network owners.

Researcher Joe Dimasi says that because of the complex and time-consuming nature of litigation, regulators are not in a strong position to advocate for consumers or retailers.

“An alternative approach is needed to deal with the complexities of utility regulation. An example of this is a system that puts users at the centre of the regulation,” Mr Dimasi said.

“The available evidence from United States, Canada, and in Australia indicates that allowing negotiation between users and owners of these networks with regulatory backup can lead to quicker, simpler decision making as well as more prudent investment decisions and lower overall prices,” Mr Dimasi says.

Mr Dimasi added that generators and retailers are likely to have a much better idea of what they need from the networks than the regulator.

“They are also much more likely to be knowledgeable about the optimal timing and nature of new investment in the network. They also have an incentive to keep these costs low.

“The benefits of introducing competition and greater consumer choice are substantial. For example, the Productivity Commission’s 2005 review of National Competition Policy estimated gains to our national income from these reforms of 2.5 per cent, adding roughly $40 billion annually.”

The regulation of utilities is necessary because some of these networks, such as the networks of poles and wires in electricity, are well recognised monopolies.

Legislation requires regulators such as the Australian Competition and Consumer Commission (ACCC) and the Australian Energy Regulator to establish an “efficient price” for utilities that reflects a competitive market.

Mr Dimasi says to capture higher prices, utility network owners must try to game the regulatory system in various ways.

“For example they can provide excessively lengthy and detailed information backed up by a range of experts, or they can provide it late in the regulatory process,” he said.

“Not only does this slow the whole process down; the regulator can risk being appealed if it does not adequately consider the information put to it as we have seen in the electricity sector.

“The result can be an ‘arms race’ of ever increasing use of experts and complexity and evermore resources used in the process.”