Application by Ergon Energy Corporation Limited (Non-System Property Capex) (No 8)

[2011] ACompT 2

AUSTRALIAN COMPETITION TRIBUNAL

Application by Ergon Energy Corporation Limited
(Non-System Property Capex) (No 8) [2011] ACompT 2

Citation:		Application by Ergon Energy Corporation Limited (Non-System Property Capex) (No 8) [2011] ACompT 2
Review from:		Australian Energy Regulator
Parties:		ERGON ENERGY CORPORATION LIMITED (ACN 087 646 062)
File number:		3 of 2010
Members:		MIDDLETON J (DEPUTY PRESIDENT), MR R DAVEY AND MR R SHOGREN
Date of determination:		10 February 2011
Date of hearing:	15, 16, 17, 19 and 22 November 2010
Place:	Melbourne
Number of paragraphs:	4
Counsel for Ergon Energy Corporation Limited:	Mr P O’Shea SC with Mr Bradley
Solicitor for Ergon Energy Corporation Limited:	Minter Ellison Lawyers
Counsel for Australian Energy Regulator:	Mr P Hanks QC with Mr P Gray, Mr T Clarke and Mr L Merrick
Solicitor for Australian Energy Regulator:	Corrs Chambers Westgarth

IN THE AUSTRALIAN COMPETITION TRIBUNAL

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 RULE 6.11.1 OF THE NATIONAL ELECTRICITY RULES
BY:	ERGON ENERGY CORPORATION LIMITED (ACN 087 646 062)

MEMBERS:	MIDDLETON J (DEPUTY PRESIDENT), MR R DAVEY AND MR R SHOGREN
DATE:	10 FEBRUARY 2011
PLACE:	MELBOURNE

DETERMINATION (NON-SYSTEM PROPERTY CAPEX)

INTRODUCTION

1. The Tribunal requested a submission by the AER on whether the Tribunal should accept Ergon Energy’s estimate of the costs of projects planned in Townsville and Rockhampton: Application by Ergon Energy Corporation Limited (Non-system property capital expenditure) (No 4) [2010] ACompT 12 (‘the Reasons’) at [48].

2. The AER has responded as follows:

   The AER understands the effect of [39] to [44] of the Reasons to be that the Tribunal accepts, on the basis of the material before it, that the Townsville and Rockhampton projects reasonably reflect an efficient means of achieving the capital expenditure objectives.

   The AER also understands that the Tribunal’s observation and request at [47] and [48] of the Reasons are directed to whether the AER considers that the cost estimates provided by Ergon Energy for the proposed transformational redevelopment of the Townsville and Rockhampton sites reasonably reflect a realistic expectation of the demand forecast and cost inputs required to achieve the capital expenditure objectives.

   Although that question was not expressly addressed in the Final Determination in response to the business case studies advanced by Ergon Energy for the six major non-system property projects, the AER has no information before it to suggest that Ergon Energy’s estimate of the scope and costs of the Townsville and Rockhampton projects, prepared on the same basis as the four approved projects, was inaccurate or unreasonable.  Accordingly, the AER considers that it is reasonably open to the Tribunal to accept Ergon Energy’s cost estimates for the transformational redevelopment proposals at the Townsville and Rockhampton sites.

3. In the circumstances, the tribunal will accept Ergon Energy’s cost estimates for the transformational redevelopment proposals at the Townsville and Rockhampton sites.

4. The Tribunal requests the parties to provide an appropriate minute of determination in light of its reasons on non-system property capex.

I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Middleton (Deputy President), RC Davey and RF Shogren.

Associate:

Dated:       10 February 2011