Open configuration options Bargaining under Monopoly: Negotiated Settlement, Customer Bargaining and Australian Energy Networks

This paper examines whether negotiated settlement has a larger role to play in the economic regulation of Australian energy networks. The argument does not suggest that monopoly has disappeared, or that regulation can sensibly be wished away. The question is more modest: where the assets are sunk, the relationship is repeated and the regulator is necessarily imperfectly informed, is it always best for the regulator to determine every material term? Settlement is best understood as a form of regulatory contracting, not as deregulation. It is valuable only where the gains from revealing customer preferences, trading across interdependent issues, securing commitment and adapting over time exceed the costs of representation, negotiation, verification and public -interest approval. Experience at FERC, in Florida, in Canada, in Australian access regimes, in GB energy and in Scottish water suggests that settlement requires capable representation, a credible adjudicative fallback and a regulator willing to review packages rather than relitigate every component. Australia’s Better Resets process has moved in a useful direction, but engagement is not the same as bargaining. The paper therefore proposes a cautious Australian pilot, beginning with agreed facts and partial settlements before any full revenue-package settlement is attempted.