Application by DBNGP (WA) Transmission Pty Ltd - [2018] ACompT 1

AUSTRALIAN COMPETITION TRIBUNAL
Application by DBNGP (WA) Transmission Pty Ltd [2018] ACompT 1

Review from: Economic Regulation Authority of Western Australia

File number: ACT 9 of 2016

Tribunal: FOSTER J (DEPUTY PRESIDENT)
MR ROBIN DAVEY (MEMBER)
MR RODNEY SHOGREN (MEMBER)

Date of Determination: 16 July 2018

Catchwords: ENERGY AND RESOURCES – application for review of an access determination made by the Economic Regulation Authority of Western Australia (ERA) in respect of the Dampier to Bunbury natural gas pipeline for the 2016-2020 regulatory period – two grounds of review, namely, whether the ERA erred in its determination of a nominal after tax return on equity of 6.98%, resulting in a nominal after tax weighted average cost of capital (WACC) of 5.83% because it failed to make an appropriate adjustment to beta in the SL-CAPM in order to accommodate alleged low beta bias in the outputs of that model and whether the ERA erred in its determination of gamma viz the value of imputation credits at 0.40 for the purposes of r 87A of the National Gas Rules because it applied an incorrect utilisation rate (theta) in the relevant formula – no reviewable error found in the ERA’s determination

Legislation:
Acts Interpretation Act 1901 (Cth)

Acts Interpretation Act 1915 (SA)

Corporations Act 2001 (Cth) s 237(2)(d)

Interpretation Act 1984 (WA)

National Gas Access (WA) Act2009 (WA), ss 3, 6B(1), 7, 9(1), Pt 3

National Gas Access (Western Australia) Law, ss 2, 2A, 8, 9, 10, 20, 27, 244, 245, 246, 248–251, 252, 258A, 259, 261

National Gas Law, ss 2, 26, 27, 28, 68C, 91, Ch 1 Pt 3, Ch 1 Pt 4, Ch 2 Pt 2, Ch 8 Pt 5, Ch 9 Pt 1 Div 2, Sch 2 cll 1, 7, 8, 9, 11, 12, 13

National Gas (South Australia) Act 2008 (SA)

National Gas Access (WA) (Part 3) Regulations 2009, s 4, Sch 1 cl 2(1)

National Gas Rules, rr 52, 64, Pt 9

Statutes Amendment (National Electricity and Gas Laws—Limited Merits Review) Act 2013 (SA)

Cases cited:
Application by ActewAGL Distribution [2010] ACompT 4

Application by ActewAGL Distribution [2017] ACompT 2

Application by ATCO Gas Australia Pty Ltd [2016] ACompT 10

Application by ElectraNet Pty Limited (No 3) [2008] ACompT 3

Application by Energy Australia & Ors [2009] ACompT 8

Application by Envestra Limited [2011] ACompT 12

Application by Envestra Limited (No 2) [2012] ACompT 4

Application by SA Power Networks [2016] ACompT 11

Applications by Public Interest Advocacy Service Ltd and Ausgrid Distribution [2016] ACompT 1

Australian Competition and Consumer Commission v Australian Competition Tribunal (2016) 152 FCR 33

Australian Energy Regulator v Australian Competition Tribunal (No 2) (2017) 345 ALR 1; [2017] FCAFC 79

House v The King (1936) 55 CLR 499

Re: Application by ElectraNet Pty Limited (No 3) [2008] ACompT 3

SA Power Networks v Australian Competition Tribunal (No 2) [2018] FCAFC 3

Date of hearing: 13–16 February 2017

Date of last submissions: 3 April 2018

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: [2018] ACompT 1
Decision Date: 16 July 2018

CaseChat Overview and Summary

The application by DBNGP (WA) Transmission Pty Ltd was heard in the Administrative Appeals Tribunal of Western Australia. The applicant sought a review of an access determination made by the Economic Regulation Authority of Western Australia concerning the Dampier to Bunbury natural gas pipeline for the 2016-2020 regulatory period. The applicant contested the determination on two grounds, specifically questioning the Economic Regulation Authority's calculation of a nominal after tax return on equity of 6.98%, which resulted in a nominal after tax weighted average cost of capital of 5.83%, and the authority's determination of gamma, the value of imputation credits, at 0.40 under rule 87A of the National Gas Rules.

The Tribunal considered whether the Economic Regulation Authority had made an error in its application of the SL-CAPM model by failing to appropriately adjust beta to account for a purported low beta bias in the model's outputs. Additionally, the Tribunal examined if the authority erred in its calculation of gamma by applying an incorrect utilisation rate in the relevant formula. The applicant argued that these errors resulted in an overestimation of the costs of capital and an underestimation of the value of imputation credits, which had a significant impact on the overall access determination.

After thorough consideration of the arguments presented, the Tribunal found no reviewable error in the Economic Regulation Authority's determination. The Tribunal determined that the authority had appropriately applied the SL-CAPM model and had correctly calculated the value of imputation credits. The Tribunal upheld the Economic Regulation Authority's determination, finding that the applicant's arguments did not establish any basis for reviewing the authority's decisions. Consequently, the application for review was dismissed.

The Tribunal confirmed that the Economic Regulation Authority's determination of the nominal after tax return on equity and the nominal after tax weighted average cost of capital, as well as its calculation of gamma under rule 87A of the National Gas Rules, were made without any reviewable error. The Tribunal's decision affirmed the authority's approach and methodology in arriving at the contested figures, and no further action was required regarding the applicant's application for review.

Orders