Alinta Asset Management Ltd v Essential Services Commission (No 2) - [2007] VSC 210

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 8453 of 2006

ALINTA ASSET MANAGEMENT PTY LIMITED	Plaintiff
v
ESSENTIAL SERVICES COMMISSION	Defendant

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JUDGE:	HOLLINGWORTH J
WHERE HELD:	Melbourne
DATE OF HEARING:	8-10, 14-17, 21-23 and 29-30 May 2007
DATE OF JUDGMENT:	22 August 2007
CASE MAY BE CITED AS:	Alinta v Essential Services Commission (No 2)
MEDIUM NEUTRAL CITATION:	[2007] VSC 210

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Legislative interpretation – Regulation of gas industry – Licensing of distributors – Principles of interpretation – Policy considerations

Licensing of distributors under section 22(1) Gas Industry Act 2001 – Whether plaintiff a gas distribution company - “Services” – “By means of” – Whether licences are exclusive

Whether plaintiff an “operator” of distribution pipeline for the purposes of National Third Party Access Code for Natural Gas Pipeline - “Owner or operator” – Multiple service providers - Access arrangements – Ring fencing requirements

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APPEARANCES:

Counsel

Solicitors

For the Plaintiff

Mr J Delany S.C.
Mr P J Booth

Blake Dawson Waldron

For the Defendant

Mr C M Scerri QC

Mr P R D Gray

Brand Partners as agents for
Gilbert & Tobin

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Overview of the natural gas industry in Victoria......................................................................... 3

Production and processing.......................................................................................................... 3

Transmission.................................................................................................................................. 3

Storage............................................................................................................................................ 5

Distribution.................................................................................................................................... 6

The Multinet system................................................................................................................... 7

The marketing of natural gas...................................................................................................... 8

Wholesale market........................................................................................................................ 8
Retail market............................................................................................................................... 9
Haulage services....................................................................................................................... 11

Gas industry reform......................................................................................................................... 11

National competition policy..................................................................................................... 11

Competition reforms.................................................................................................................. 14

Reform of the Victorian gas industry....................................................................................... 15

The current Victorian legislative regime...................................................................................... 19

Gas Safety Act 1997................................................................................................................. 20
Pipelines Acts........................................................................................................................... 21
MSO rules................................................................................................................................ 23
Retail rules................................................................................................................................ 23
The Distribution Code.............................................................................................................. 24

The GIA 2001..................................................................................................................................... 25

Overview of the licensing scheme............................................................................................ 25

The meaning of section 22(1)..................................................................................................... 26

Provide..................................................................................................................................... 27
Services..................................................................................................................................... 28
By means of.............................................................................................................................. 30
Distribution pipeline................................................................................................................. 31
Principal or agent..................................................................................................................... 31
The exclusivity argument......................................................................................................... 34
Deemed distribution contracts.................................................................................................. 39
Other relevant legislation.......................................................................................................... 40
The GSA.................................................................................................................................. 40
Pipelines Acts........................................................................................................................ 41
The Distribution Code.......................................................................................................... 42
The MSO and retail rules..................................................................................................... 42

The Access Law................................................................................................................................. 42

Overview of the Code................................................................................................................ 42

Access arrangements................................................................................................................ 45
Ring fencing............................................................................................................................. 47
Interpretation of the Code......................................................................................................... 48

The Code and “service providers”........................................................................................... 49

The scope of the dispute............................................................................................................ 49
“Operator”............................................................................................................................... 50
Services..................................................................................................................................... 52
The Mount Newman case........................................................................................................ 53
Industry meaning..................................................................................................................... 55
Multiple service providers........................................................................................................ 56
Ring fencing............................................................................................................................. 60
Access arrangements and efficiency carryovers....................................................................... 62
One or two access arrangements?............................................................................................ 64

Why the ESC says that the legislation applies to AAM............................................................ 65

AAM and the operating services agreement............................................................................... 68

AAM’s business........................................................................................................................... 68

The OSA........................................................................................................................................ 69

Multinet’s other contracts............................................................................................................... 74

PIES............................................................................................................................................... 75

AMP.............................................................................................................................................. 76

The gas field operations contracts............................................................................................ 76

Burwood and Moorabbin contracts.......................................................................................... 76
Current status of the gas field operations contracts.................................................................. 78
BBS alliance agreement............................................................................................................ 81

Other AAM contracts....................................................................................................................... 83

AMRS agreement........................................................................................................................ 83

UCMS agreement........................................................................................................................ 84

Short term project contracts....................................................................................................... 85

Dealing with retailers...................................................................................................................... 85

Execution of use of system agreements................................................................................... 85

Negotiation of UoSAs................................................................................................................. 87

Operational issues in relation to retailers............................................................................... 89

AAM’s other activities in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] VSC 210
Decision Date: 22 August 2007

CaseChat Overview and Summary

The matter before the court involved Alinta Asset Management Ltd, challenging a decision by the Essential Services Commission regarding the licensing of gas distribution companies under the Gas Industry Act 2001. The plaintiff sought a declaration that the Commission's interpretation of the relevant provisions was incorrect, leading to an erroneous conclusion that the plaintiff was not a gas distribution company eligible for a licence. The dispute further extended to the interpretation of the National Third Party Access Code for Natural Gas Pipeline, specifically concerning the definitions of "owner or operator" and the ring fencing requirements for access arrangements.

The central legal issues before the court were the interpretation of key terms in the Gas Industry Act and the National Third Party Access Code. The court was required to determine if the plaintiff qualified as a gas distribution company under section 22(1) of the Act, and whether the plaintiff was an "operator" of a distribution pipeline as defined in the Code. The court also had to assess the implications of the plaintiff being involved in multiple service provider arrangements and how this affected the ring fencing requirements.

The court's analysis focused on the statutory language and context, applying principles of statutory interpretation to discern the legislative intent. The court examined the definition of "services" and "by means of" in the context of the Act and concluded that the plaintiff's activities did not fall within the scope of the statutory provisions. Additionally, the court considered policy implications and regulatory objectives, finding that the plaintiff's role as a service provider did not align with the legislative framework for licensing gas distribution companies. The court held that the plaintiff was not an "operator" within the meaning of the Code and that the Commission's decision was correct.

The court upheld the Commission's interpretation and dismissed the plaintiff's appeal. The plaintiff was not deemed a gas distribution company under the Act, and therefore, was not eligible for the relevant licence. The court's decision emphasised the importance of adhering to statutory definitions and regulatory frameworks in the gas industry.

Orders