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Application by Energex Limited (Gamma) (No 5)

Application by Energex Limited (Gamma) (No 5)

Case [2011] ACompT 9 12 May 2011

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AUSTRALIAN COMPETITION TRIBUNAL
Application by Energex Limited (Gamma) (No 5) [2011] ACompT 9

Citation: Application by Energex Limited (Gamma) (No 5) [2011] ACompT 9

Review from: Australian Energy Regulator

Parties:
ENERGEX LIMITED (ACN 078 849 055)

ERGON ENERGY CORPORATION LIMITED
(ACN 078 646 062)

ETSA UTILITIES (ABN 13 332 330 749)

File number(s): 2 of 2010
3 of 2010
4 of 2010

Members: MIDDLETON J (DEPUTY PRESIDENT),
MR R DAVEY AND MR R SHOGREN

Date of Reasons: 12 May 2011

Date of hearing: 29 April 2011

Place: Melbourne

Category: No Catchwords

Number of paragraphs: 51

Counsel for Energex Limited: Mr S Doyle SC with Mr A Pomerenke

Solicitor for Energex Limited: Allens Arthur Robinson

Counsel for Ergon Energy Corporation Limited: Mr T Bradley

Solicitor for Ergon Energy Corporation Limited: Minter Ellison Lawyers

Counsel for ETSA Utilities: Mr CA Moore with Mr M Borsky

Solicitor for ETSA Utilities: Gilbert + Tobin

Counsel for Australian Energy Regulator: Mr P Hanks QC with Mr P Gray and Mr T Clarke

Solicitor for Australian Energy Regulator: Corrs Chambers Westgarth

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No 2 of 2010

RE:
APPLICATION UNDER SECTION 71B OF THE NATIONAL ELECTRICITY LAW FOR A REVIEW OF A DISTRIBUTION DETERMINATION MADE BY THE AUSTRALIAN ENERGY REGULATOR IN RELATION TO ENERGEX LIMITED PURSUANT TO CLAUSE 6.11.1 OF THE NATIONAL ELECTRITICY RULES

BY:
ENERGEX LIMITED (ACN 078 849 055)
Applicant

File No 3 of 2010

RE:
APPLICATION UNDER SECTION 71B OF THE NATIONAL ELECTRICITY LAW FOR A REVIEW OF A DISTRIBUTION DETERMINATION MADE BY THE AUSTRALIAN ENERGY REGULATOR IN RELATION TO ERGON ENERGY CORPORATION LIMITED PURSUANT TO CLAUSE 6.11.1 OF THE NATIONAL ELECTRICITY RULES

BY:
ERGON ENERGY CORPORATION LIMITED
(ACN 078 646 062)
Applicant

File No 4 of 2010

RE:
APPLICATION UNDER SECTION 71B OF THE NATIONAL ELECTRICITY LAW FOR A REVIEW OF A DISTRIBUTION DETERMINATION MADE BY THE AUSTRALIAN ENERGY REGULATOR IN RELATION TO ETSA UTILITIES PURSUANT TO CLAUSE 6.11.1 OF THE NATIONAL ELECTRITICY RULES

BY:
ETSA UTILITIES (ABN 13 332 330 749)
Applicant

MEMBERS:

MIDDLETON J (DEPUTY PRESIDENT),
MR R DAVEY AND MR R SHOGREN

DATE:

12 MAY 2011

WHERE MADE:

MELBOURNE

REASONS FOR DECISION: GAMMA
INTRODUCTION

In May 2010, the AER made a distribution determination regulating the charges each applicant may impose for the provision of its regulated services for a period of five years from 1 July 2010.
The NEL establishes a regime for what it describes as “merits review” of certain decisions of the AER. In July 2010, the Tribunal (Finkelstein J, President, R Davey and R Shogren) granted each applicant leave under s 71B of the NEL to review the AER’s decisions on particular issues addressed in the determinations.
One issue in respect of which leave was granted was common to each determination and applicant. The other issues in respect of which leave was granted were peculiar to a particular applicant.
The expressions used in these reasons are those employed by the Tribunal in its earlier reasons relating to these applications, which describe the…

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.

Continue reading Application by Energex Limited (Gamma) (No 5)

Details

AGLC: Application by Energex Limited (Gamma) (No 5) [2011] ACompT 9
Case: [2011] ACompT 9
Decision Date: 12 May 2011

CaseChat Overview and Summary

The Australian Competition Tribunal was asked to review the decisions made by the Australian Energy Regulator (AER) regarding the distribution determinations for Energex Limited, Ergon Energy Corporation Limited, and ETSA Utilities. The primary issue under review was the value of 'gamma' (γ), a component used in calculating the cost of corporate income tax. The Tribunal was required to determine the appropriate value for gamma based on the distribution ratio (F) and the utilisation rate (theta or θ), considering various reports and submissions from the AER and the applicants. The Tribunal had to decide whether the SFG's March 2011 report, which proposed an estimate of 0.35 for theta, should be accepted as the best estimate for the purpose of setting a value for gamma.

The Tribunal concluded that the SFG’s March 2011 report was the best dividend drop-off study available for estimating gamma. The Tribunal accepted SFG's estimate of 0.35 for theta, rejecting arguments that minor issues in the database construction or multicollinearity should diminish the weight of the SFG study. The Tribunal also rejected the AER's suggestion that other studies, such as the Beggs and Skeels study, should be given any weight. The Tribunal determined that the value of gamma, based on the distribution ratio of 0.7 and theta of 0.35, should be set at 0.25. The Tribunal emphasised the importance of considering the objective of providing a reasonable opportunity for the recovery of efficient costs, outweighing any presumption of regulatory inertia.

The Tribunal will make a final determination in each application, incorporating all earlier decisions, and has extended the period for determining the applications to 31 May 2011. The parties are requested to bring before the Tribunal a determination in each application reflecting the various decisions made by the Tribunal.

Orders