Application by ETSA Utilities - [2010] ACompT 5

AUSTRALIAN COMPETITION TRIBUNAL
Application by ETSA Utilities [2010] ACompT 5

Citation: Application by ETSA Utilities [2010] ACompT 5

Review from: Australian Energy Regulator

Parties: ETSA UTILITIES (ABN 13 332 330 749)

File number: 4 of 2010

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

Date of delivery of reasons: 13 October 2010

Date of hearing: 13, 14, 15, 16, 17, 20 and 21 September 2010

Place: Melbourne

Category: No Catchwords

Number of paragraphs: 33

Counsel for ETSA Utilities: Ms M Sloss SC with Mr CA Moore and Mr M Borsky

Solicitor for ETSA Utilities: Gilbert + Tobin Lawyers

Counsel for Australian Energy Regulator: Mr P Hanks QC with Mr Gray, Ms R Ellyard, Mr T Clarke and Mr L Merrick

Solicitor for Australian Energy Regulator: Corrs Chambers Westgarth

IN THE AUSTRALIAN COMPETITION TRIBUNAL

FILE NO. 4 of 2010

RE:
APPLICATION UNDER SECTION 71B OF THE NATIONAL ELECTRICITY LAW FOR REVIEW OF A DISTRIBUTION DETERMINATION MADE BY THE AUSTRALIAN ENERGY REGULATOR IN RELATION TO ETSA UTLITITES PURSUANT TO CLAUSE 6.11.1 OF CHAPTER 6 OF THE NATIONAL ELECTRICITY RULES

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

MEMBERS:

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

DATE OF PUBLICATION OF REASONS FOR DECISION:

13 OCTOBER 2010

PLACE:

MELBOURNE

REASONS FOR DECISION

On 14 September 2010, the Tribunal made the following announcement and directions:
OTHER MATTERS: The Tribunal has formed the view that a ground of review has been established for the purposes of section 71R(3) of the National Electricity (South Australia) Law in relation to the AER’s rejection of the Applicant’s claim for an addition to be made to its opening RAB in respect of easements extant as at 1 July 1999.
In these directions:
“category 1 easements” means registered power line easements in relation to ETSA Corporation’s distribution network as at 1 July 1999;
“category 2 easements” means registered padmount transformer easements in relation to ETSA Corporation’s distribution network as at 1 July 1999;
“category 3 easements” means deemed statutory easements arising from unregistered grants of easements by landowners in relation to ETSA Corporation’s distribution network as at 1 July 1999;
“category 4 easements” means deemed statutory easements arising from licences granted by landowners in relation to ETSA Corporation’s distribution network as at 1 July 1999;
“category 5 easements” means registered easements in relation to ETSA Corporation’s distribution network as at 1 July 1999 arising as a result of land subdivisions; and
all dollar figures are in dollars as at 1 July 1999.
THE TRIBUNAL DIRECTS THAT:
1.By 4pm on 5 November 2010, the AER file and serve any report addressing the following estimates relied upon by the Applicant:
(a)       as to category 1 easements:
(i)        the rate of $1949 per easement for acquisition costs;
(ii)       the rate of $872/km for survey costs;
(b)       as to category 2 easements:
(i)the rates of $2564 and $2052 per easement for acquisition costs;
(c)       as to category 3 easements:
(i)        the rate of $1282 per easement…

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: [2010] ACompT 5
Decision Date: 13 October 2010

CaseChat Overview and Summary

ETSA Utilities, an electricity distribution network service provider in South Australia, applied for a review of a distribution determination made by the Australian Energy Regulator (AER) concerning the valuation of easements extant as at 1 July 1999. The dispute centred on the AER's rejection of ETSA's claim for an adjustment to its opening regulatory asset base (RAB) to reflect the value of these easements. The Australian Competition Tribunal (Tribunal) was tasked with determining whether the AER had correctly exercised its discretion in not adjusting the RAB to include the value of these easements.

The primary legal issue was whether the AER had the authority to adjust ETSA's opening RAB as stipulated in the Electricity Pricing Order (EPO). This hinged on the interpretation of clause 7.3 of the EPO and its compatibility with the National Electricity Rules (Rules). ETSA argued that the AER had incorrectly exercised its discretion by not considering their valuation of the easements in detail and that this was an unreasonable decision. The Tribunal needed to ascertain whether the AER's failure to detail consider the valuation was indeed an incorrect exercise of discretion.

The Tribunal found that the AER had the discretion to adjust the opening RAB under clause 7.3 of the EPO, as the context of the EPO did not require subordination to the Rules. This conclusion was based on the fact that while other references in the Electricity Act 1996 (SA) were amended to refer to the Rules, the provision under which the EPO was made was not similarly amended. The Tribunal further found that the AER's decision not to consider ETSA's valuation in detail was an incorrect exercise of discretion because the $6 million figure adopted was only a partial valuation and did not align with ETSA's updated methodology. Consequently, the Tribunal directed the AER to provide a report addressing ETSA's estimates and set a timeline for ETSA to respond, before adjourning the application.

In summary, the Tribunal found that the AER had the discretion to adjust ETSA's opening RAB and that the AER's failure to detail consider ETSA's valuation constituted an incorrect exercise of discretion. This decision established a ground for review under the National Electricity (South Australia) Law, leading to the Tribunal's direction for further submissions and reports.

Orders