Capacity expansion pricing

Past review

A key pricing principle is that regulated firms should be compensated to recover efficient investment expenditure.

The Research team looked into how a monopoly infrastructure provider should be compensated for undertaking major investments in new facilities.

Such facilities provide additional capacity to cater for a significant increase in demand.

The QCA looked at the application of pricing principles in a discussion paper on capacity expansion and access pricing for rail and ports, published in April 2013. Seven stakeholders made submissions in response to the paper.

The project is now closed. The QCA may rely on aspects of this analysis from time to time to inform its views on certain matters.

In a commercial setting, parties agree to an access price for major capacity additions, to apply over the contract period. However, in the case of declared rail access in Queensland, the service is provided by a monopolist and the price of access is determined after long-term capacity contracts have been signed. Clearly it is easy for disputes to develop in such circumstances.

The QCA is investigated options for pricing of access to major expansions in capacity for rail and port infrastructure.  This included looking at where access to one tranche of capacity should be priced the same or differently to access to another. A discussion paper was published in April 2013.