Citipower Pty v Regulator General and Powercor Australia Limited
[1999] VSC 348
•17 September 1999
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION Do not Send for Reporting Not Restricted
No. 7625 of 1998
No. 5109 of 1999
| CITIPOWER PTY (ACN 064 651 056) | Plaintiff |
| V | |
| OFFICE OF THE REGULATOR-GENERAL | First Defendant |
| - and - | |
| POWERCOR AUSTRALIA LIMITED (ACN 064 651 109) | Second Defendant |
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JUDGE: | Eames J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 – 27; 30 August 1999 | |
DATE OF JUDGMENT: | 17 September 1999 | |
CASE MAY BE CITED AS: | Citipower v Regulator General and Powercor | |
MEDIA NEUTRAL CITATION: | [1999] VSC 348 | |
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Statutes – interpretation – Electricity Industry Act 1993 – Interpretation of Legislation Act 1984, s. 27, s. 35 – Office of Regulator-General Act 1994 – whether power to grant new licence or variation of licence for distribution of electricity to Docklands area – whether present holder of distribution licence over an area has exclusive rights to distribution within that area – whether licence grants proprietary rights – use of extrinsic materials – subordinate instruments – use of amending legislation as an aid to interpretation of earlier legislation.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr N. Young QC | Blake Dawson Waldron |
| For the First Defendant | Mr J. Beach | Freehill Hollingdale & Page |
| For the Second Defendant | Mr P. Murdoch QC with Mr P. Booth | Phillips Fox |
HIS HONOUR:
The plaintiff, Citipower Pty (hereafter referred to as “Citipower”), and the second defendant, Powercor Australia Limited (“Powercor”), are two of five electricity distribution and supply companies which came into existence, as part of the restructuring of the State’s electricity industry in 1994 and 1995. As part of the changes to the system, the pre-existing government owned enterprise, State Electricity Commission of Victoria, had its functions and staff taken over in a two-stage process, firstly, of corporatisation and, then, of privatisation. The industry was to be thereafter regulated by a statutory body, the Office of Regulator General (“the Office”), the first defendant.
The five licence holders were, and continue to be, licensed to conduct their distribution businesses over specified geographic areas, which together covered the whole of metropolitan and rural Victoria. These five licences, each titled a “distribution, supply and connection” licence, (but more usually, just called “the distribution licence”) had a specified geographic area of operation. The areas identified in each licence did not overlap.
The licenses identified categories of consumers of electricity. The first category was that of franchise customers, being relatively small scale consumers. The second category, non-franchise customers, were larger enterprises consuming electricity at a level significantly greater than that of the franchise customers. In addition to each holding a distribution and supply licence, the five distribution companies also held retail sale licences which both entitled and, in effect, obliged each company to sell electricity to any franchise customer in its area which requested it to do so. The retail sales licence also entitled each licensee to sell electricity to any non-franchise customer, anywhere, whether or not that customer resided within the area of the company’s licence. The franchise customers, however, had no choice as to which company they purchased electricity from. Provided the distribution company for their area held a retail sale licence, the franchise customers in that area were obliged to purchase electricity from that company. Non-franchise customers, however, could seek the supply of electricity from any supplier; those customers had the benefit of competition between licensed retailers, and there were companies which, in addition to the five distribution companies, held retail sales licences. If a sale of electricity was made by a licensed retailer to a non-franchise customer, then a supply of electricity to the consumer’s line would have to be provided through the infrastructure of the licensed distribution and supply company which covered the area in which the customer was located. If the sale was made by another distribution company when acting as a retailer (utilising its retail licence) then that company would have to pay a fee to the local distribution company, in whose licence area the non-franchise customer resided. The fee was for supplying the electricity to the customer through the distribution infrastructure of the distribution company. The terms of the licences obliged the “local” distributor to agree to distributing and supplying electricity in that way, although the sale to a non-franchise customer in its area had been made by another distribution company.
Citipower had licences which covered a large section of the Melbourne Metropolitan Area, including the Central Business District. The licence area included the area known as Docklands, a relatively underdeveloped area at the time when the licences were first granted, in 1994, but which had already been earmarked as an area for very significant future growth, including the erection of a major sporting stadium. Citipower has developed, and maintains, an extensive distribution infrastructure throughout its licence area, but because there has, to date, been only limited development in Docklands, it has not yet created the extensive distribution infrastructure which will eventually be required to meet the localised needs of what is anticipated to be the very extensive development in that area. So, at the moment, there is only a limited distribution and supply infrastructure created within the actual Docklands boundaries.
Citipower believed, and now submits, that as the holder of a distribution licence for an area which included Docklands, it therefore had the exclusive rights to distribute electricity to Docklands. Whilst it would, in due course, have had the obligation to provide a distribution infrastructure, within Docklands, as development took place, it was more than content to do so, as the rights to distribution of electricity in the Docklands area, and the opportunities for sales to franchise and non-franchise customers which its status as the local distribution company would provide, are likely to be very lucrative.
Citipower contends that its expectation that it would be the exclusive holder of a distribution and supply licence in Docklands area was confirmed by the legislation, which, it says, provided (if not explicitly, then by implication) that each of the five distribution companies would have exclusive rights to be the sole distribution company operating in the areas identified by its licence. That entitlement was also reflected in the terms of its licences, so it submitted. Whilst the major changes to the electricity industry were intended to introduce competition in an industry which had hitherto been a State owned monopoly, Citipower contends that the legislation, and the legislators, accepted that the distribution of electricity was to continue to be what had been identified as a “natural monopoly”. Powercor has now challenged that assumption of exclusive distribution rights to the Docklands area.
Powercor had licences which covered a rural area to the west of Melbourne. The eastern boundary of its licence area adjoined the western boundary of Citipower’s licence area. Powercor has applied to the Office under s. 161 of the Electricity Industry Act 1993 for a new distribution licence, to cover the Docklands area, or, alternatively, pursuant to s. 164(1)(b), for a variation of its existing distribution licence, to extend the area of its licence so as to incorporate the Docklands area, for the purpose of establishing a distribution infrastructure.
The Application for Variation of Powercor’s Distribution Licence
In the application for variation, dated 4 March 1998, Powercor sought to have its distribution and supply licence varied, by re-defining the distribution area, so as to include Melbourne Docklands. It advised the Office that in response to the Docklands Authority’s request for expressions of interest for the creation of infrastructure within the Docklands area, Powercor (as part of a consortium) had successfully tendered to supply the “trunk infrastructure (including the electricity distribution network) within the Docklands development area”. Powercor indicated that it preferred to obtain a variation, rather than a new licence, because the fees were less for a variation. In the application, Powercor stated that until 31 December 2000 it was not seeking revenue sales rights relating to franchise customers in the Docklands area, and would agree to have its retail licence amended so as to exclude what it called “its right” to sell electricity to franchise customers in the Docklands area.
Powercor acknowledged that a distribution licence imposed “obligations that relate to its licence area, rather than to its distribution system or assets”. Powercor said that: “in an area where there are two licensees these obligations may introduce inappropriate responsibilities” - which it then identified, and which it suggested would need to be addressed and modified in the licences. Among the suggested modifications, one related to the Retail Tariff Metering Code which obliged the local distribution company to install and maintain meters throughout the area of the licence. That should become an obligation attached to a particular distribution system, rather than to an area covered by the licence, Powercor argued. Thus, Powercor would be obliged only to supply meters to those customers attached to its system, and not to others in the distribution area who might be connected, instead, to Citipower’s distribution system. It also acknowledged that the Tariff Order was framed in a way which presupposed a single distribution company in an area, a situation which could lead to losses of revenue to Powercor, but which it was prepared to tolerate, it said.
The Application for a New Distribution Licence
The application for a new distribution licence was dated 29 December 1998, and was an application for a distribution and supply licence. Once again, Powercor stated that it did not seek rights to sell electricity to franchise customers, and acknowledged that “Citipower will have rights and obligations to sell electricity to any franchise customers within the Docklands area until 31 December 2000, under the terms of the retail Licence issued to it by the office”. (The background to that concession was that Government policy, as reflected in later amendments to the legislation was that, as at 31 December 2000, the exclusive rights of distribution companies to sell to the franchise customers in their area would cease.) Once again, as with the variation application, Powercor acknowledged that having two distribution licences covering the same area created inappropriate duplication of responsibilities which were imposed by the distribution licence, and also under various industry Codes.
The Draft Decision
In June 1999 the Regulator General, Mr John Tamblyn, published what he called a “Draft Decision”, as to the two applications. The Draft Decision reflected, he said, analysis by the Office of the relevant issues, and he invited further submissions in response to his tentative views. The draft decision is presumably published pursuant to the power in s. 12 of Office of the Regulator General Act 1994 (“the ORG Act”) which permits the Office to publish “statements and guidelines relating to the performance of its functions and the exercise of its powers”.
In the lengthy paper constituting the Draft Decision, the Regulator General canvassed the matters which had been taken into account, both in assessing his legal power and as to his analysis of the competing practical, policy and other considerations which were raised by the applications. He announced that the Office had tentatively decided to issue Powercor with a new and additional licence, to distribute electricity in the Docklands area, and to provide distribution services by means of a “trunk infrastructure” (which was said to be the infrastructure that brings services to the boundary of the seven individual development precincts which constituted the Docklands development). The licence would also allow Powercor to provide services by means of any distribution assets over which Powercor obtained control.
In stating the tentative conclusion, the Draft Decision made a series of pronouncements which demonstrated, Mr Young QC submitted, on behalf of Citipower, that the Office was intending to act beyond its powers under the relevant legislation. Mr Beach, counsel for the Office, submitted that I should have no regard to the Draft Decision, as it did not constitute the exercise of power. Were I to act against the Office by reference to the Draft Decision I would be interfering in a decision making process which is yet to conclude. It is submitted that the Office has not yet made a decision, and accordingly I could not make an order even if I felt that the Office had demonstrated its intention to act on a mistaken understanding of its power. There has been no decision taken by the Office, and a preliminary or recommendatory statement is not sufficient to constitute a reviewable decision, so it was submitted: AB v Lewis [1980] VR 151; Nicol v Attorney General [1982] VR 353. A preliminary decision to merely consider the application is not sufficient to provide the basis for relief, as though a final decision had been taken: Australia Broadcasting Tribunal v Bond (1990) 170 CLR 321. These cases, however, are not to point, as all are concerned with particular provisions allowing administrative appeals. The situation here is one where the Office has itself announced an intended course, and the plaintiff contends that that proposed course demonstrates a wrong view of its powers.
In my opinion, were I to conclude that the Draft Decision does disclose a misapprehension by the Office as to its power, I would be entitled to make a declaration to that effect, and indeed, the very fact that a Draft Decision has been published virtually invites the court to make such a declaration, if such error is manifest. Thus, where the Regulator General states, at page 16, that “there is no legal obstacle to a decision by the office to issue a licence to another party (eg. Powercor) to provide electricity distribution services in the Docklands”, I would be entitled to declare that assertion to be wrong in law, if that was my conclusion, even though the Office has not made a final pronouncement to that effect.
I agree with Mr Beach, however, that my decision must be confined to the question of the existence, or otherwise, of the statutory powers by the Office. I am not concerned in this case to evaluate and review the exercise of its powers. I am in no position to evaluate the factors to which the Regulator General has had regard in deciding, tentatively, that Powercor is an appropriate recipient of such a licence. Having said that, however, it is appropriate that I note some of the findings made in the Draft Decision because they may be relevant to the question whether the Office has misconceived the powers which it holds under the relevant legislation.
The Regulator General acknowledged in the Draft Decision that the ultimate provider of distribution services to Docklands was likely to become, and remain, a monopoly supplier. Additionally, he concluded that if Powercor was granted the distribution licence to provide the trunk infrastructure, that was not likely to be the least-cost option. The Office was of the opinion, however, that were Powercor to succeed in its application it would enhance competition to provide distribution assets within the Docklands precincts. (“Distribution fixed assets” are defined in the licence, in clause 1, and appear to constitute the electrical wires running from the trunk infrastructure to the area, or general location, of the end user - the lines along the streets rather than the lines into the houses, was how counsel described it to me). Distribution fixed assets would, I believe, include “trunk assets”, ie. equipment used to transform electricity to a lower voltage.
The trunk infrastructure, according to the Draft Decision, represented only a very small part of the overall costs of providing those distribution assets which would be required for Docklands. As yet, no decisions had been made as to who would provide those other assets. It was noted, at pages 19-21, that once the distribution assets were in place, then the high cost of their provision would have strong natural monopoly characteristics. A competing service could not be provided without building a duplicate network, in whole or part. That was an unlikely event, so that there was likely to be only one supplier of distribution services in the area once the assets were controlled by that party.
The Draft Decision noted that Citipower had existing, extensive, distribution infrastructure near the boundaries of Docklands, and had provided the entire infrastructure which had been required, to date, not only within the Docklands area, but throughout its licence area.
Without concerning myself with the detail of the decision, nor summarising the contents of the Draft Decision, it is plain that in reaching his tentative decision the Regulator General considered an extensive range of technical and cost factors, and had given prominence to the likely effect on the reduction of costs to consumers if the new licence was granted.
The Originating Motions
In the two proceedings which are before me Citipower seeks relief by way of certiorari or prohibition to prevent the Office of Regulator-General (“the Office”) granting to Powercor either a new distribution licence, or a variation of an existing licence, and, alternatively, seeks declarations that it would be beyond power for the Office of Regulator General to grant the proposed licence or variation of licence.
There was a good deal of force in the complaints of Mr Murdoch QC, senior counsel for Powercor, that the arguments advanced by Mr Young QC for the plaintiff ranged well beyond those encompassed by the terms of the originating motions, or in the written outline of argument which had been filed pursuant to an order of the Listing Master. That is no doubt explained by the fact that Mr Young came into the case at a very late stage, and no doubt it was by virtue of that fact that Mr Young (and consequently, and for the most part, counsel for the defendants) made almost no reference to the outline of argument which had been filed prior to his involvement. In an address which occupied three days, Mr Young referred to a wide range of material contained in many lever arch files of documents, together with a great many legal authorities. The absence of an outline of argument, in those circumstances, made my task more difficult, as it no doubt also did for counsel for the defendants.
Notwithstanding the difficulties which had been caused to the defendants by departure from the expected areas of argument, I allowed amendments to the terms of the originating motions, and permitted the new, and wide ranging, arguments to be advanced, as it seemed to me to be in the interests of all parties that the real areas of controversy be identified and be litigated at the earliest opportunity.
The Office of Regulator General itself advanced substantial arguments in opposition to the plaintiff’s applications. Mr Beach, counsel for the Office, acknowledged that it would only be in exceptional circumstances that a body such as his client would appear, so as to argue a case, in proceedings where a party was challenging the exercise of its powers. Mr Beach submitted that in presenting its arguments his client was not adopting the position of a protagonist, but was confining its argument to the question of the powers and procedures of the Office, a course not disapproved by the High Court: see R v Australian Broadcasting Tribunal; Ex Parte Hardiman 29 ALR 289 at 306. Although I felt that the arguments went beyond those limits, at times (counsel for the second defendant, for the most part adopting those as arguments on behalf of his client also), no objection was taken by the plaintiff to Mr Beach’s presentation, and the fact that counsel for the plaintiff was himself permitted to amend the originating motions so as to present argument which ranged beyond those originally enunciated in the originating motions would make it difficult for any complaint to be seriously advanced by the plaintiff against the role adopted by Mr Beach on behalf of the Office.
In essence, Citipower contends that the legislation permits there to be only one distribution licence over any given area in the State. Distribution licences can not overlap, so it submits, and the legislation accepts and preserves a monopoly over distribution and supply held by the holder of any such licence. The legislation, according to Citipower, expressly prevents the Office from creating a situation of competition between distribution licences holders over the same areas of land. The defendants deny that any such prohibition appears in the legislation, and contend that it is within power for the Office to issue overlapping distribution licences over the same area.
The determination of the question of the powers held by the Office will depend, in the first place, upon interpretation of the relevant terms of the Electricity Industry Act 1993 (“the Act”), as much amended, and the terms of the Office of the Regulator-General Act 1994. The legislation which governed the regulation of the electricity industry, and the granting of new licences or variations of licences, was contained in Part 12 of the Act, introduced in 1994.
The Use of Extrinsic Material
In interpreting the legislation, and determining the intention of the legislature, Mr Young QC, for Citipower, sought to refer to a wide variety of extrinsic materials. He submitted that he was entitled to do so by application of s. 35 of the Interpretation of Legislation Act 1984. Among the material referred to were three reports published for the Government through the Office of State Owned Enterprises of the Department of the Treasury, and, also, Hansard extracts and Explanatory Memoranda relating to the Second Reading Speeches when the relevant legislation was introduced. Counsel for the defendants submitted that recourse to such material was unnecessary, because the intention of the Parliament was clear from the terms of the legislation. If recourse was to be had to extrinsic material then they objected to use being made of the first of those reports, but the main objections related to a range of other material on which Mr Young sought to rely.
Mr Young sought to refer to the terms of the licences issued to the plaintiff and second defendant and to a wide range of Codes and other instruments published or promulgated by the Office. Counsel for both the first and the second defendants objected to my having regard to much of the material which Mr Young sought to call in aid of interpretation of the legislation as extrinsic material pursuant to s. 35 of the Interpretation of Legislation Act. It is appropriate that I address this issue at the outset.
Section 35 provides as follows:
“35. Principles of and aids to interpretation
In the interpretation of a provision of an Act or subordinate instrument—
(a)a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object; and
(b)consideration may be given to any matter or document that is relevant including but not limited to—
(i)all indications provided by the Act or subordinate instrument as printed by authority, including punctuation;
(ii)reports of proceedings in any House of the Parliament;
(iii)explanatory memoranda or other documents laid before or otherwise presented to any House of the Parliament; and
(iv)reports of Royal Commissions, Parliamentary Committees, Law Reform Commissioners and Commissions, Boards of Inquiry or other similar bodies.”
The principles governing the application of s. 35 have been exhaustively examined: see Catlow v Accident Compensation Commission (1989) 167 CLR 543; Mills v Meeking (1990) 169 CLR 214; Humphries v Poljak [1992] 2 VR 129; R v Boucher [1995] 1 VR 110 at 122-124. In Boucher it was held, at 122-3, that the section requires that the courts seek to ensure that an interpretation of legislation is adopted that is consistent with the purpose and object of the Act. It is not, of course, mandatory that the court refer to the extrinsic material, and as Dawson J held in Mills v Meeking, at 235, the section does not entitle the court to rewrite an Act, but merely requires the court to construe an Act in the light of its purposes.
Mr Beach submitted that the terms of the Act were clear and unambiguous, and the extrinsic material could not assist the court in its task. In Re Bolton; Ex Parte Beane (1987) 162 CLR 514 at 518, the High Court held that where words in a statute are in themselves precise and unambiguous they best declare the intention of the legislators (see, too, Thompson v Judge Byrne (1999) 73 ALJR 642, at 653, per Gaudron J).
In a recent case (Walker v In Line Couriers Pty Ltd (1999) 73 ALJR 1084, at 1085, per McHugh, Kirby and Callinan JJ), the explanatory memorandum which accompanied amendments to an Act contained statements by the Minister as to the purpose of the amendments, which statements were at odds with the words used in the amendment. The understanding expressed by the Minister could have been accommodated in the Act by reading into the Act some additional words (as taken from the memorandum). The High Court, however, re-affirmed the statements in Re Bolton; ex Parte Beane, to the effect that where extrinsic material (such as an explanatory memorandum) appears to cast doubt on the construction of words favoured by a plain reading of those words, then, “the explanatory memorandum cannot override the clear purpose of the Act as deduced from its own language”.
As was held in Boucher, the fact that the language of the legislation is not apparently unclear or ambiguous does not preclude the court from having regard to extrinsic material, so that it might ensure that the construction to be given to the legislation accords with the purpose or object of the Act. However, as McHugh J held in Newcastle City Council v GIO (1997) 191 CLR 85 at 109: “When the express words of a legislative provision are reasonably capable of only one construction and neither the purpose of the provision nor any other provision in the legislation throws doubt on that construction, a court cannot ignore it and substitute a different construction because it furthers the objects of the legislation”.
Mr Beach for the Office, submitted, that, in any event, were extrinsic material to be considered, it supported the contentions of the defendants. He referred to the explanatory memorandum that accompanied the introduction of Part 12 into the Act in 1994. That material is obviously admissible and relevant under s. 35. It is certainly of more obvious relevance under s. 35 than instruments which were created subsequently by a non-Parliamentary body, the Office of Regulator General. That explanatory memorandum made no suggestion, at all, that exclusivity of distribution licences was intended to apply, nor did the Minister make such a statement in the Second Reading Speech.
Mr Young submitted that the Reform Papers could qualify under sub-paragraph (b)(iv) of s.35, as akin to reports of Boards of Inquiry. The Reform Papers, were written by the Treasury Department. They represent advisory material for government, material not too dissimilar to the material under consideration in Boucher. Although I doubt that any case of such material could be justified under s. 35(b)(iv), I should not take too restrictive a view of the material to which I might make use under s. 35. Care is required, rather than some rigid approach; the critical question is whether the material helps me to discern the true intention of the legislature. In that regard, I do not abandon common sense and logical analysis when considering material said to provide assistance in that task.
In my opinion, having regard to the principles stated in the cases cited, the material comprising the 1993 and 1994 reform papers and the Second Reading speech (as well as the explanatory memoranda) should appropriately be considered to be relevant material under the section. I reach a similar conclusion as to a later report, published in 1995.
As to the range of material, described, loosely, as subordinate instruments, Mr Young submitted that subordinate instruments were expressly permitted to be used under s. 35, by virtue of the reference to them in sub-section(b)(i). I agree with Mr Beach, however, that that is a misreading of the sub-section. Read as a whole, the section, when speaking of “subordinate instrument”, is considering the interpretation of such an instrument, itself, and stating that relevant extrinsic material may be used to interpret such an instrument. It is not stating that a subordinate instrument can be a relevant extrinsic item which can be used to interpret a statute. To be used by me, the instruments to which I was referred must constitute “any matter or document” relevant to the interpretation of the Act.
It is to be noted, too, that all of the items listed under the sub-paragraphs under s. 35(b) are items that would only have come into existence before the relevant legislation had been passed. That is some indication of the improbability that material published subsequently could provide assistance in interpreting the meaning of the earlier legislation. I do not accept that Codes, and similar instruments, brought into existence after the passage of the Act, and brought into existence by an independent body such as the Office, could provide any assistance in interpreting the meaning of the legislation, as intended by the Parliament, when Part 12 was first introduced. It could, of course, be different with regard to subsequent amendments to the original legislation, where it might be presumed that the legislature was aware of the subordinate instruments which had come into existence after passage of the original legislation, but it seems to me that, even then, great care would be required before one could be satisfied that the instruments had any value in assisting my task of interpretation, as to later amendments to the legislation.
Notwithstanding my reservations as to the efficacy of some of the material, I will deal with the extrinsic material at some length because it does, in my view, provide an important backdrop to the legislation, as amended from time to time, although, in the final analysis, I conclude that the interpretation of the legislation for which the plaintiff contends can not be accepted. The reading of the extrinsic material, or some portions of that material, could well explain why Citipower had understood, as it claims it did, that a distribution licence holder would have a monopoly for distribution and supply in its area. In making that observation I am not making any finding of fact as to whether, as it also claims, Citipower had been given assurances by or on behalf of government as to that issue, prior to the signing of an agreement for the sale of shares in Citipower, at the time of its privatisation. I have not heard evidence as to this, and make no finding. The plaintiff claims to have been taken by surprise at the suggestion that it did not acquire a monopoly right under the licence, but, however much Citipower and other observers may have expected or understood that a monopoly would be or was granted by the licence, I have concluded that whilst as a practical reality a licence holder may have gained a monopoly over distribution and supply within the area of its licence, that outcome was neither the intended nor the achieved result of the legislation.
extrinsic material
(a) The 1993 Reform Paper
In October 1993 the government published a paper setting out government policy for the future of the electricity supply industry. The paper was titled “A Competitive Future – Electricity”. In their joint preface to the paper, the Minister for Energy and Minerals and the Treasurer spoke of Victoria “unbundling its state-based electricity supply monopoly to develop a more competitive and commercial environment”, with consumers benefiting from lower prices and better service, delivered by an industry based on sound financial footings.
The paper asserted, at page 6, that creating competition was a key objective of the reforms. The paper noted that there were different ways in which to foster competition, but noted:
“However, the most effective form of competition is when the buyers of a firm’s product have the choice to buy elsewhere, or where there is the threat of entry into the industry of new competitors. This type of choice is not available under the current vertically integrated industry structure. At the same time, it is recognised that some elements of the (Electricity Supply Industry) are natural monopolies and can only be subject to limited competition”. (My emphasis.)
That passage introduces the critical issue that divides the parties. The plaintiff, Citipower, contends that in recognition of the fact that distribution of electricity was, and must remain, a monopoly, the government drafted the reform legislation to manifest that intention. The defendants submit that whilst the tendency for distribution to be a natural monopoly was recognised by the government and the legislature, the objective was that competition would be encouraged at all levels, including at the level of distribution, and that the legislation was drafted so that the regulation body, the Office, was empowered to grant more than one distribution licence over the same geographic area, notwithstanding the fact that to do so would tend to defeat, or to reduce, the breadth of the natural monopoly in the area of distribution. Thus, when the paper stated, at page 8, that “creating a competitive electricity market is an evolutionary process” then, according to the defendants, the government was merely acknowledging that the defeat of what might today be seen to be a natural monopoly might take time, but nonetheless drafted its legislation, and subsequently the amending legislation, to permit that evolutionary process to occur, so as to defeat the monopoly, if the opportunity arose.
The Reform Paper stated that, as the first stage in the evolutionary process, the government had replaced the State Electricity Commission of Victoria with three new businesses, which were to conduct generation, transmission and low voltage distribution across the State. Former employees of SECV would be transferred to the new businesses, which were to be state owned. The paper indicated that the limited additional role of Municipal Electrical Undertakings (ie. local government electricity distribution and supply bodies) in the distribution and supply of electricity would ultimately also be replaced by a limited number of distribution companies, that would cover the entire state.
A reading of this lengthy Paper can not lead to any confident conclusion as to whether it was intended that the natural monopoly of distribution was to be entrenched by legislation. There is no statement of such intention, in clear terms, anywhere in the document. There are, indeed, passages that suggest the contrary, ie. a desire to promote competition at all levels: for example, at page 69, where it is said that “the most effective form of competition is where buyers can choose between a number of suppliers, and where there is also the threat of new suppliers entering the market”. That is consistent, the defendants contended, with the government intending that there might be more than the five privatised companies which were to become the holder of distribution licences under the legislation.
The evolutionary nature of the proposals, as emphasised in the paper, was stressed by the defendants. I was referred to a passage, at page 68, viz: “It is not possible to be definitive about the final structure, in terms of the optimal number and structure of generation or distribution entities, for example”. On the same page, it was noted that the initial structure which would be set up would be monitored, so that market developments could be taken into account, as part of the evolutionary process.
However, whilst there are passages in the paper which support the contentions of the defendants as to the intention manifest in the paper concerning the proposed legislative framework, my impression on reading the Paper is that its authors assumed that distribution (what it calls the “distribution wires” business) would simply not be competitive, and, thus, it seems to have been anticipated that the legislation would recognise that fact. In reaching that conclusion I have particular regard to passages which appear at page 60-61, and at page 73.
At pages 60-61 the following passages appear, under a heading “The Distribution and Supply Sectors”:
“6.7 The Distribution and Supply Sectors
Currently, both the low voltage distribution of electricity through local networks (the distribution ‘wires’ business) and the wholesale purchase and retail sale of electricity (the retail ‘supply’ business) are integrated functions within local SECV Customer Service Businesses and the MEUs. The distribution ‘wires’ business, like the transmission ‘wires’ business, is a strong natural monopoly due to the high costs of duplicating the assets. However, the retail supply business is potentially competitive for large customers in the short to medium term, and perhaps for smaller customers in the longer term. Even small consumers could eventually gain the advantages of competition by purchasing electricity through power brokers or other participants who aggregate the market power of such small customers.
If there is to be a competitive supply market, then a number of key issues need to be addressed:
øNumber of participants. Competitive purchasing of electricity at the wholesale level, and competitive sale at the retail level, depend on there being a number of participants in the market. These might include regionally based integrated distribution/supply businesses, large customers, and wholesale electricity brokers.
øOpen access. In the competitive sector, there should be open access to large commercial and industrial customers. In the captive market, domestic and small industrial and commercial customers will need to be protected through regulation.
øTransmission and distribution pricing. These should be fair and transparent.
øCross-subsidies between captive and competitive market sectors. There should be no cross-subsidy on supply prices between competitive and captive market sectors. If a distribution body is also a supplier, then these functions will need to be separated, at least for accounting purposes.
The distribution “wires” business is a natural monopoly, which can be conducted on a regional basis by awarding area franchises for defined regions. Benchmark or yardstick performance comparisons can then be made between them to encourage efficiency improvements. Performance comparisons are easier between franchises that are similar in size and customer composition. In determining the optimal number of distribution franchises, the Government needs to consider any economies of scale in delivering distribution services, the minimum number of franchises for effective comparison, and geographic and demographic variations.
Possible options for defining distribution businesses include:
øA number of similar “pie-slice” distribution businesses. Similarity in size, customer types, load profiles and coverage of urban and rural areas allows for easier performance comparisons between businesses. It also minimises the need for equalisation payments, if cross-subsidies and uniform pricing are to continue.
øMultiple similar metropolitan distribution businesses and multiple similar rural distribution businesses. This option recognises the different supply economics of rural and metropolitan areas, more clearly exposes the cross-subsidies between rural and urban areas (but not those within the different areas), and allows for performance comparisons within the two groups. This option will require significant equalisation payments between the metropolitan and rural businesses, if cross-subsidies and uniform pricing are to continue.
The development of an optimal structure for the distribution sector will need to take into account the MEUs. The overall objective should be to improve to the efficiency and responsiveness of the sector.”
The closing paragraph, in the above extract, suggests that for distribution the primary concern was not to generate direct competition, in an area where it was not thought to be possible, but to ensure that the distribution process was efficient and responsive. The reference to the awarding of “area franchises for defined regions”, as the means for dealing with the natural monopoly within the distribution wires business, seems to me to be particularly indicative of the future intentions, especially given the recognition that cross subsidies would be a continuing feature of the distribution business.
At page 73, under the heading “Distribution”, the report stated:
“Distribution
The Government is contemplating the further restructure of the distribution sector into a number of separate but similar independent regional distribution businesses. The restructure will cover the 18 SECV Customers Service Businesses across Victoria, and the 11 Municipal Electricity Undertakings (MEUs) in metropolitan Melbourne. The new businesses, together with large consumers, will be able to participate in the competitive wholesale electricity market.
While the transport of electricity through local distribution networks (the distribution ‘wires’ business) is a natural monopoly, the purchase of electricity from generators and its sale at the retail level (the retail ‘supply’ business” is potentially competitive at least for larger customers. The Government will be investigating the advantages of introducing competition into the retail ‘supply’ business of the distribution sector.”
(b) The 1994 Reform Paper
In February 1994 the Government published a second paper, titled “Stage two: A Competitive Future – Electricity”. In this paper the government announced its intention to replace the three companies and the 11 municipal electricity undertakings with eight new companies, comprising five distribution companies, a grid company, a system security and wholesale market control company and a parent generating company. I was told that it was this paper which the Minister for Energy was referring to, on 6 May 1994, when he introduced the new legislation into Parliament. It was not disputed that I was entitled to have regard to this paper, pursuant to s. 35 of the Interpretation of Legislation Act.
In this paper it was recognised that the five distribution companies would be “regionally based” and would cover the metropolitan and rural areas of the state. It was said, at page 3, of the proposed structural changes (into the 11 companies) that it would “separate the natural monopoly elements from the potentially competitive parts of Victoria’s electricity industry. This is a necessary but not sufficient condition for competition”. At page 8 it was stated that:
“A competitive electricity market requires the isolation of natural monopoly components (transmission and distribution) from potentially competitive elements (generation and retailing). Generation and electricity retailing are linked by a wholesale electricity market and a retail market.”
At page 17 the Paper discussed the range of options which had been considered for distribution, and those studies disclosed that there was a preference for the establishment of five distribution businesses - “after larger and smaller configurations were eliminated” (because they did not satisfy one or more of the criteria, being, effective competition, operational efficiency, financial viability, and business value and saleability). The authors continued, after acknowledging that cross subsidies would need to be maintained for several years, that: ”Five stable, profitable and saleable distribution businesses can be created from the existing Electricity Service Victoria and MEU assets but it does require integration of the territories to balance the customers serviced in each business. In addition, asset values will adjust to reflect the different levels of profitability in each of the businesses.”
That passage does seem to me to be an acknowledgment that there would not be competition, over the same areas, between the five businesses, but that the respective advantages and disadvantages of their assigned areas, and the relative numbers of customers in the areas, among other factors, would be reflected in cross subsidies. Had it been intended that they might compete in the same areas one would have expected that to have been stated, and for it to have been explained how that would be consistent with the proposed cross subsidy and asset valuation approach which was being adopted.
In the Paper the terms “equalisation” and “natural monopoly” were defined as follows:
“Equalisation:
The process of redistribution of the revenues from uniform tariffs between different regions. This usually takes into account the different costs of supply in each regions, and should reflect a fair rate of return on the assets required for a certain standard of service in each region.
Natural Monopoly
An activity, usually because of high fixed costs associated with it, that cannot economically be provided by more than one market participant.”
The assumption of there being no direct competition between distribution businesses over each other’s areas was further emphasised in passages at page 19, where, under the heading “Achieving a competitive electricity industry”, the Report states:
“A key Government objective is empowerment of the consumer.
However, the wires businesses – transmission and local distribution lines – are natural monopoly network businesses where competition and choice in relation to transporting electricity (with minor exceptions) are not practical. System security and the pooling function are also monopolies in that the technical and commercial rules by which the system is managed need to be centrally co-ordinated.
Consumer choice and demand side management can be encouraged through competition in generation and energy retailing, giving consumers an incentive to transfer their electricity consumption from times of high prices to times of low prices. This represents a significant advantage of empowering purchasers in a competitive market. The conditions required to create such a market are:
• an open and competitive wholesale electricity market;
•a transmission grid that provides open access on a transparent and non discriminatory basis; and
•regulation to separate line and energy charges at the distribution level and requiring distribution businesses to provide access for competing retailers transporting energy to customers."
Mr Beach submitted that the reference to “minor exceptions” in the first paragraph, cited above, is consistent with an intention that in instances where it is practical to prevent a natural monopoly a second licence might be granted which related to the same area specified in another licence. Thus, he submitted, it would be appropriate in what he termed “greenfield’ areas that such an approach might be permitted. Although the term does not appear to be employed in the legislation, Powercor, in both of its applications, adopted what it suggested was a stated view of the Office that what it called an “insert” licence could be permitted to be granted in a “greenfield” area. That latter term was described by Powercor as meaning an “area where a development is in a clear site with a defined boundary, does not result in significant stranded assets, and will result in a viable stand alone network.” In its applications Powercor submitted that Docklands was a greenfields area, where little development had taken place and where the assets which presently existed were obsolete, and quite inadequate for the proposed development of the area.
Mr Beach submitted that the granting of a licence to Powercor for the Docklands area was a development that was within the concept of a “minor exception”, as discussed in the Reform Paper, above. I have difficulty with that proposition, which gives little meaning to the word “minor”, given the scope of the proposed Docklands development, and the potential precedent effect of acceptance of either of Powercor’s applications.
The 1994 Reform Paper also stated, at page 20, that there would become two classes of retail customers, first, those whose volume of electricity supply enabled them, as non-franchise customers, to seek competitive quotes from competing retailers, or to obtain their supply wholesale, and secondly, those franchise customer who “will not be able to exercise choice and will be captive to the distribution business responsible for the area in which they are situated”(my emphasis). The distribution business would be obliged to supply these customers in its area. The distribution business was to be required to keep separate its accounts relating to the wires business and those relating to the retail sale of electricity.
(c) The Second Reading speech
Little assistance can be gained by reference to the Second Reading speech of the Minister that accompanied the introduction of Part 12 into the Act, by way of amendment Act No 53 of 1994. The Minister referred to the second Reform Report, cited above, and quoted large extracts from the report, including the reference to “the separation of natural monopoly elements from the potentially competitive parts of the industry”. Mr Beach submitted that the extracts quoted by the Minister from the 1994 Report disclosed that notwithstanding that the 1994 Reform Report identified both transmission and distribution as natural monopolies, the Minister accepted transmission, alone, as being appropriately regarded as a natural monopoly, not distribution also.
Mr Young, for Citipower, submitted that to give the speech that interpretation is to misread what the Minister said, because, in context, he was plainly accepting the conclusion stated in the Report that both activities were natural monopolies. Either interpretation of the speech could be correct, but as it does not appear to me that the Minister was intending to reject any proposition stated in the Report, Mr Young’s contention is more likely to be correct.
What may be concluded from the speech, however, is that, whilst it recognised that distribution had been, and still was, a natural monopoly no explicit statement was made, either way, as to whether it was intended, for all time, that the five distribution companies were to be free of competition from other distribution companies in their assigned areas of operation.
(d) Other Instruments: the Licences
Mr Young, in his reply to the submissions of other counsel, disavowed the suggestion that the terms of the licences could be used as an aid in interpreting the legislation which was the source of power for their creation. However, in examining what he said was the scheme of the legislation, and in contending that the legislative intention was that there be only one distribution company in any defined geographic area, Mr Young made much of the terms of the distribution licence and the retail licence, although he gave greater emphasis to a series of Codes promulgated by the Office, pursuant to its power under s. 26 of the ORG Act. Mr Beach submitted that I should not have regard to the terms of the licences, at all, in order to interpret the power given to the Office under the Act. Without finally deciding the question, it seemed to me that it was useful to consider the terms of the licences, if only because it is difficult to understand the areas of dispute, and the context in which later amending legislation was passed, without understanding what were the terms of the licences.
The distribution licence granted the right to the licensee “to distribute electricity for supply, and to supply electricity, in the distribution area...” The terms were identical for all five companies granted distribution licences, and their distribution areas were clearly identified, and did not overlap. Section 163 of the Electricity Industry Act 1993, as introduced in 1994, provided that the Office could issue licences on such conditions as it determined. Without limiting the range of terms and conditions, a number of conditions, which might be included, were set out in s. 163(3), such as requiring the licensee to enter agreements of a kind and on such terms as the Office specified, or preventing the licensee from engaging in specified business activities, or requiring the licensee to observe industry codes as determined by the Office. As the section demonstrates, the power of the Office to set terms and conditions was extremely wide.
The distribution licence did not purport to state that the licensee had an exclusive right to distribute and supply electricity in the distribution area. The licence imposed an obligation to provide connection services to a retailer who wished to sell electricity to a non-franchise customer, and to do likewise for a customer, if the customer requested that it be done. The licence was not transferable (clause 23).
Clause 6 of the licence imposed an obligation upon the licensee to allow another distributor to make use of the equipment and facilities of the licensee so as to facilitate the distribution of electricity by the other distributor. Although this clause might merely facilitate the transfer of electricity from one distribution area to another, so that in the latter area the electricity would then and there be distributed, in my view it also contemplated the holding of more than one distribution licence in the same area. Clause 6.2 provided that:
“The licensee must ensure that it has sufficient rights in respect of all poles, trenches, conduits, communication lines and cables in the distribution area (other than those owned or controlled by another distributor licensed to distribute electricity for supply, and to supply electricity in the distribution area) to enter into an effective contract for the use thereof by another distributor pursuant to clause 6.1(b)(1).”
I have concluded that I would not be entitled to use the terms of the licence so as to interpret the meaning of the legislation under which the licence was granted. Such an approach to interpretation, which I am satisfied would be inappropriate in any instance, is made even more inappropriate in the present case, given the sheer breadth of the authority given to the Office under the Act as to the terms and conditions imposed in the licence. However, if I am wrong in that conclusion then, were I to have regard to the terms of the licence, I would conclude, in any event, that the contention of the plaintiff that it demonstrates that the plaintiff was to hold an exclusive right to distribute electricity in its assigned area, is not supported by a reading of the licence.
Mr Young submitted that the significance of the licence was that it imposed on the distributor an obligation to supply electricity to any person in the distribution area who requested it. Citipower would remain under that obligation with respect to any person in Docklands, even if Powercor obtained a licence, also, for the Docklands area. This condition meant that Citipower would either have to provide its own infrastructure in order to meet any such requests or would be forced to pay Powercor for the use of Powercor’s infrastructure so as to meet its, Citipower’s, obligations as to distribution under its own licence. Citipower was not in a position to pick and choose which customers it might deal with, whereas Powercor, in its application, so Mr Young submitted, was seeking to do just that, and to deal with only the “cream” of available customers.
The Retail Licence which was issued to each of the five distribution companies, in addition to their distribution licences, authorised the licensee to sell electricity to franchise customers “in the licensee’s distribution area”, and to non-franchise customers anywhere in Victoria. When first issued, the licence said nothing about there being an exclusive right of sale to franchise customers within its distribution area. Clause 4, however, imposed an obligation to sell electricity to a franchise customer who was “in the licensee’s distribution area”, and who requested the sale of electricity.
The defendants submitted that an exclusive right of sale to franchise customers was not introduced in to the retail licence of a distributor until s. 162(2B) was inserted into the Act by Act No. 56 of 1995. I will discuss that section in detail later, but, in essence, it expressly stipulated that a licence granted to a distribution company, to sell electricity to franchise customers, was to be an exclusive right of sale to those customers.
However, far from that amendment being the first occasion when an exclusive right of sale was granted, Mr Young submitted that there had always been that exclusive right, and, that s. 162(2B) was introduced solely because of a change in government policy which was to bring that exclusive right to an end at 31 December 2000. The Act was amended by Act No. 56 of 1995, he submitted, so as to provide that all customers could deal with any party for the purchase of electricity after 1 January 2001. It was solely for the purpose of bringing the exclusive right of sale to an end, that the Act, and the licence, had to specifically mention the exclusive right at all, Mr Young submitted. In response, the defendants dispute that suggestion, but point out that even if it was correct that, as Mr Young contended, a pre-existing exclusive right was merely being acknowledged by s. 162(2B), the exclusivity related only to sale and not to distribution of electricity.
The new licence which was later substituted because of amendments to the Act, re-stated its date of operation as 3 October 1994. The new licence replaced the original licence on and from 8 April 1999. The new licence expressly provided that the right of sale to all customers, both franchise and non-franchise customers, would be open to competition after 1 January 2001. Clause 4.4 provided, however, that, save for certain specified situations, a licensee “must not refuse to sell electricity to a franchise customer in relation to an electrical installation of a franchise customer that is in the licensee’s distribution area”. Thus, although an exclusive right of sale to franchise customers until 1 January 2001 was being acknowledged, there was a corresponding obligation to sell electricity to those customers. Once again, the plaintiff contends that Powercor is seeking to obtain a licence which would not oblige it to sell to all franchise customers who requested that it do so, and thus was seeking a licence of a different character to that created under the Act. This pointed to the conclusion, Mr Young submitted, that there was no power to grant the licence, or the variation, which the Office was proposing.
(e) Other Subordinate Instruments: the Codes
On the same day that Part 12 came into operation - 3 October 1994 - the following Codes took effect; The Distribution Code, the Retail Tariff Metering Code, the System Code, the Supply and Sale Code. The Tariffs and Charges Deed (the deed was subsequently replaced by the instrument, the Tariff Order) also came into effect. The terms of the distribution licence (which also took effect from 3 October 1994) required the licensee to have regard to these Codes.
Mr Young submitted that each of those Codes reflected the assumption that there would be but a single distribution licensee for each area, although he conceded that none of the Codes expressly said as much. The Tariff and Charges Deed (and the Tariff Order which replaced it in 1994 by an Order in Council made pursuant to s. 158A) provided for transmission fees to be paid by distribution licence holders, and the fees charged to Citipower were weighted at a higher rate than those charged to rural licence holders, such as Powercor. The charges were determined by a calculation having regard to the value of assets and of the franchise of each licence holder, and the country was subsidised by the city. Mr Young contended that the cross-subsidies were calculated on the assumption that distribution areas would be exclusively held by licensees. Counsel submitted that it would be inconsistent for there to be such a weighting in favour of rural licensees and yet for those rural licensees to be entitled to simply move in to an area covered by a city distribution licence so as to obtain a competing licence and then seek to provide distribution services to just one lucrative locale, within the broader licence area of another distributor. That is what Powercor is seeking, Mr Young submitted. It wants to obtain the cream of consumers, based in one area, Docklands, leaving the franchise “dross” in that area to the existing licence holder or, more likely, itself assuming the monopoly role as distributor throughout the Docklands area in replacement of Citipower. Mr Beach contended, however, that a close examination of the terms of the Tariff and Charges Deed (see Attachment 9, note 1, at page 49 of the Deed) demonstrated that the fees for transmission services which were charged to distributors related to the quantity of electricity which the licencees obtained, and did not relate, at all, to any suggestion that they were to have an exclusive right to distribution in their area.
I accept that the mere fact that the effect of these anomalous situations (if they arose) could be ameliorated by simply changing some of the terms and conditions of Citipower’s or Powercor’s licences, or of the Codes, does not affect the fact that the identification of anomalies is a pointer to the proper interpretation which should be given to the legislation. But it is merely a pointer.
Where there is a clear, literal, meaning arising from the words of an enactment, and no real doubt as to the intention of Parliament then the fact that that meaning produces anomalies or injustices would not permit the court to depart from the literal meaning of the words. The fact that absurdity, injustice or anomaly will be produced, may however itself give rise to doubt as to whether Parliament intended the literal meaning to prevail, and thus the literal meaning might be departed from: see Mills v Meeking, supra, at 242, per McHugh J; Cooper Brookes (Woollongong) Pty Ltd v F.C.T, supra, at 394, per Gibbs CJ. Where the words in a statute are precise and unambiguous they serve best to declare the intention of the legislature (see Re Bolton; Ex Parte Beane (1987) 162 CLR 514, at 518; Thompson v Judge Byrne (1999) 73 ALJR 642, at 653). Furthermore, when the express words of a legislative provision are reasonably capable of only one construction and neither the purpose of the provision nor any other provision in the legislation throws doubt on that construction, a court cannot ignore it and substitute a different construction because it furthers the objects of the legislation: per McHugh J in Newcastle City Council v GIO General Ltd (1997) 191 CLR 85, at 109. Whilst it may be said that the legislation is relatively limited in its terms, and does not, in clear terms, spell out, either way, whether a distribution licence gives exclusive rights to distribution and supply in the area of the licence, that does not indicate that there is ambiguity in the legislation, so that an interpretation which avoids the suggested anomalous results should be preferred. From another perspective it may be said that the situation is, in fact, quite clear. The contention for which the plaintiff argues, namely, that the legislation grants it an exclusive area of distribution and supply, gains no support from any of its provisions and the prohibition on the power of the Office to grant a licence to Powercor over the same area as that to which its own licence applies, is not demonstrated by any of its provisions either. In other words, there is no indication at all, in my opinion, that the Office would be prohibited from granting a further distribution licence to the same area as that identified in an existing licence.
In any event, I am not persuaded that the outcomes identified by Mr Young do amount to such absurd, unjust or anomalous results as to lead to a different interpretation of the legislation than that which I have given to it. Even if the outcomes, as predicated, were established as probabilities, those outcomes would not cast doubt on my interpretation of the Act.
Whether the Variation Procedure was an Appropriate Option
Although the Office has indicated that it will consider the applications by dealing with the new licence application, rather than the variation application, that is not a concluded position, and so I have been asked to consider whether, even if there was power to grant a new licence, there was power and/or whether it would be inappropriate, for there to be a variation, in any event.
The variation provision is s. 164.
164. Variation or revocation of licence
(1)A licence or the licence conditions may be varied -
(a)in accordance with the procedures specified in the licence conditions; or
(b)by agreement between the Office and the licensee; or
(c)by a notice in accordance with sub-section (2) served on the licensee.
(2)The Office must not vary a licence or the licence conditions by a notice unless -
(a)the Office is satisfied that the variation is necessary having regard to the objectives specified in section 157; and
(b)the Office has given the licensee an opportunity to make representations on the matter.
(3)The Office may revoke a licence in accordance with the procedures specified in the licence conditions or, in the case of a licence to generate electricity for supply or sale or a licence to distribute or supply electricity (other than a licence to which an approval under section 162(2AA) applies), if it is satisfied that the holder of the licence -
(a)is not a company incorporated under the Corporations Law of Victoria; and
(b)is not a statutory authority; and
(c)is not a corporation all the shares in which are held by, or on behalf of, the State or by a statutory authority.”
Mr Young submitted that it could not be the case that by mere agreement the Office could ignore the provisions of s. 157. Furthermore, he submitted, variation is intended to relate to a change to a licence holder’s own licence, one which affects only that licensee, and its clients, not another licensee; it would be a particularly inappropriate approach to adopt here, given the breadth of what Powercor is seeking by way of a variation. Finally, Mr Young submitted that if it is sought to rely on the notice provisions of s. 164(1)(c), no necessity for the variation has been demonstrated as required, by sub-section (2).
As I have earlier stated, although the variation application has not been withdrawn the Office has announced that it will deal with the application not by way of variation, but as an application for a new licence. The question whether the variation is being sought under s. 164(1)(b) or (1) (c) does not arise. It is, however, clear from what is said in the Draft Decision that the Office had never intended to treat it as a variation by notice pursuant to s. 164(1)(c). Thus, the considerations of sub-section(2) (which relate only to a notice of variation situation, under paragraph (1)(c)), do not arise (although the objectives under this Act and the ORG Act would have general relevance, whatever sub-section was being applied).
Mr Beach submitted that a variation of licence so as to add Docklands to the existing licence area would be merely a variation of conditions, as recognised by s. 164(1). Furthermore, whilst no provision requires that notice, in such circumstances, be given to Citipower, notice has in fact been given. The absence of notice provisions says nothing as to the power to grant a variation, but, in my view, it does point to the fact that, as Mr Young argued, it would not be appropriate to adopt a variation approach rather than a new application approach here.
My tentative view is that assuming the Office had power to deal with the matter by way of a variation application it would have been inappropriate for the Office to have proceeded in that way. That view does not represent a concluded opinion as to whether the Office had power to deal with the variation application, rather than the new licence application. Given the fact that the Office had advised that it will not proceed with the variation application, and Powercor has accepted that approach, then notwithstanding the fact that the variation application has not been formally withdrawn, it seems to me to be inappropriate to finally rule on this question. The argument before me concentrated attention on the question whether a new licence could be granted.
Conclusion
I have concluded that the Office of Regulator General has power to consider and, if appropriate, grant Powercor’s application for a licence to the Docklands area.
The originating motion concerning the variation application is really predicated on the same arguments as to the terms of the Act, and as to the powers of the Office, as arise in the separate proceedings relating to a new licence. I have rejected the contentions of Citipower as to the interpretation of the legislation which should be adopted. In the circumstances, it is appropriate that both proceedings should be dismissed and I decline to grant the relief sought by the plaintiff in its applications.
Both proceedings will be dismissed. I will hear the parties as to costs.
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