Enernoc Australia Pty Ltd v Minister for Energy for the State of Western Australia
[2017] WASC 29
•10 FEBRUARY 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ENERNOC AUSTRALIA PTY LTD -v- MINISTER FOR ENERGY FOR THE STATE OF WESTERN AUSTRALIA [2017] WASC 29
CORAM: MARTINO J
HEARD: 10 FEBRUARY 2017
DELIVERED : 10 FEBRUARY 2017
FILE NO/S: CIV 2979 of 2016
BETWEEN: ENERNOC AUSTRALIA PTY LTD
First Applicant
ENERNOC PTY LTD
Second ApplicantAND
MINISTER FOR ENERGY FOR THE STATE OF WESTERN AUSTRALIA
Respondent
Catchwords:
Practice and procedure - Application for determination of an issue raised in an application for judicial review before another issue
Legislation:
Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA)
Electricity Industry Act 2004 (WA)
Result:
Application for determination of issue refused
Liberty to apply for determination of a reformulated preliminary issue
Category: B
Representation:
Counsel:
First Applicant : Mr C G Colvin SC & Mr B C Gauntlett
Second Applicant : Mr C G Colvin SC & Mr B C Gauntlett
Respondent: Mr G Tannin SC & Mr T Russell
Solicitors:
First Applicant : Grondal Bruining Pty Ltd
Second Applicant : Grondal Bruining Pty Ltd
Respondent: State Solicitor for Western Australia
Case(s) referred to in judgment(s):
Landsdale Pty Ltd v Moore [2009] WASCA 176
MARTINO J: By an application for judicial review filed on 16 November 2016 the applicants seek judicial review of the decision of the respondent made on 26 May 2016 'to make, purportedly under regulation 7(4) of the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) the Amending Rules 2016'.
The grounds of the application consist of 23 paragraphs and a prayer for relief. Paragraphs 1 to 20 set out the respondent's contentions as to legislative and factual matters which they say is relevant to their application. Paragraph 21 contains an allegation as to the effect of the decision in respect of which they seek judicial review. Paragraphs 22 and 23 contain the applicants' contentions as to why in making that decision the respondent exceeded his jurisdiction.
At a directions hearing on 13 December 2016 Pritchard J ordered that the question of whether the grounds outlined in pars 1 to 22 of the application be dealt with by way of preliminary hearing be determined on a date to be fixed and ordered that the hearing of the preliminary issue be provisionally listed on a date to be fixed. The dates fixed were 10 February 2017 and 13 March 2017 respectively.
For the reasons which follow I have decided that the grounds outlined in pars 1 to 22 should not be dealt with as a preliminary issue but that the applicants should have liberty to reformulate the preliminary issue that they say should be determined.
The Electricity Industry Act 2004 (WA), the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) and the market rules
Section 122(1) of the Electricity Industry Act 2004 (WA) (the Act) provides for the making of regulations for the purpose of establishing a market (the market) in relation to the wholesale supply of electricity in the South West interconnected system (the SWIS). The SWIS is defined in s 3(1):
South West interconnected system means the interconnected transmission and distribution systems, generating works and associated works ‑
(a)located in the South West of the State and extending generally between Kalbarri, Albany and Kalgoorlie; and
(b)into which electricity is supplied by ‑
(i)one or more of the electricity generation plants at Kwinana, Muja, Collie and Pinjar; or
(ii)any prescribed electricity generation plant;
Section 122(2) provides that the objectives of the market are:
(a)to promote the economically efficient, safe and reliable production and supply of electricity and electricity related services in the South West interconnected system;
(b)to encourage competition among generators and retailers in the South West interconnected system, including by facilitating efficient entry of new competitors;
(c)to avoid discrimination in that market against particular energy options and technologies, including sustainable energy options and technologies such as those that make use of renewable resources or that reduce overall greenhouse gas emissions;
(d)to minimise the long term cost of electricity supplied to customers from the South West interconnected system; and
(e)to encourage the taking of measures to manage the amount of electricity used and when it is used.
Section 123 provides that the regulations are to provide for there to be rules (the market rules) relating to the market and the operation of the SWIS and may provide for the establishment of initial market rules and the amendment or repeal and replacement of those rules by rules made in accordance with the regulations and the market rules:
123.Market rules
(1)Without limiting section 122, the regulations are to provide for there to be rules (the market rules) relating to the market and to the operation of the South West interconnected system setting out or dealing with such matters as are prescribed by the regulations.
(2)The market rules are not subsidiary legislation for the purposes of the Interpretation Act 1984 and section 42 of that Act does not apply to them or to rules amending them or repealing and replacing them.
(3)The Interpretation Act 1984 sections 43 (other than subsection (6)), 44, 48, 48A, 50(1), 53, 55, 56, 58, 59, 75 and 76 and Part VIII apply to the market rules as if they were subsidiary legislation.
(4)The regulations may provide for ‑
(a)the establishment of the initial market rules;
(b)the amendment, or repeal and replacement, of the market rules by rules made in accordance with the regulations and the market rules; and
(c)the publication, commencement, and laying before each House of Parliament, of the initial market rules and rules amending, or repealing and replacing, the market rules.
The Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) (the regulations) were made in 2004 and published in the Government Gazette, WA of 30 September 2004. They provided, in regs 6 and 7, for the making of market rules and for the amendment of those rules:
6.Market rules: general provisions
(1)In this regulation -
'market rules' includes amending rules.
(2)Subject to regulation 7 market rules are to be made by the Minister.
(3)Market rules commence at a time fixed -
(a)by the market rules; or
(b)in a manner provided for by the market rules.
(4)Different commencement times may be fixed under subregulation (3)(a) for different provisions of market rules.
(5)Different commencement times may be fixed under subregulation (3)(b) for different provisions of market rules unless those market rules provide otherwise.
(6)Market rules made by the Minister are to be published in the Gazette and are to be laid before each House of Parliament within 10 sitting days of that House next following their publication in the Gazette.
7.Amending the market rules
(1)The market rules may provide for matters relating to the initiation, development, making, approval, publication and commencement of amending rules.
(2)Market rules under subregulation (1) may be made so as to apply to -
(a)amending rules of a specified kind; or
(b)amending rules other than rules of a specified kind,
and have effect despite regulation 6(2).
(3)Despite anything in this regulation or the market rules, rules replacing the market rules in whole are to be made by the Minister and regulation 6(6) applies to them.
The market rules were published in the Government Gazette of 5 October 2004. Rule 1.1.2 provided that the market rules governed the market and the operation of the SWIS, including the wholesale sale and purchase of electricity, reserve capacity and ancillary services.
The glossary in the market rules defined reserve capacity as:
Capacity associated with a Facility. Capacity may be:
(a)the capacity of generation Systems to generate electricity and send it out into a network forming part of the SWIS; or
(b)Demand Side Management, being the capability of a Facility registered by the Market Customer at a connection point to a Network forming part of the SWIS to reduce the consumption of electricity at that connection point.
Demand Side Management (DSM) was defined to as:
A type of capacity held in respect of a Facility connected to the SWIS; specifically the capability of a Facility connected to the SWIS to reduce its consumption of electricity through the SWIS, as measured at the connection point of the Facility to the SWIS.
Facility was defined as meaning any of the facilities described in cl 2.29.1, which provided:
The following are Facilities for the purposes of these Market Rules:
(a)a distribution system;
(b)a transmission system;
(c)a generation system; and
(d)a connection point at which electricity is delivered from a distribution system or transmission system to a Rule Participant ('Load').
The applicants
The applicants are part of a group of companies that provides electricity demand response and energy management solutions in Australia and overseas. The applicants do not generate electricity, but provide reserve capacity by DSM.
The Act and the market rules provide for the registration of participants in the market. The first applicant is a registered participant in the market. The second applicant has a number of contracts with electricity consuming facilities that can provide DSM.
The amendments to the market rules that are challenged in this application for judicial review
On 13 November 2015 the regulations were amended. One of the amendments was the insertion of reg 7(4):
(4)Despite anything in this regulation or the market rules, the Minister may make amending rules during the period beginning on the day on which the Electricity Industry (Wholesale Electricity Market) Amendment Regulations (No. 3) 2015 regulation 5 comes into operation and ending on 1 July 2017.
On 26 May 2016 the Minister, acting under reg 7(4), amended the market rules by making the Amending Rules 2016 (the market rules amendments) which were published in the Government Gazette on 31 May 2016. Some of the market rules amendments have commenced operation, some will commence operation in the future. Schedule B, pt 3 to the market rules amendments is to commence on 1 October 2017. It is those amendments which are the relevant amendments for the applicants' application.[1]
[1] Affidavit of Dean Edward Grondal sworn 25 January 2017 [26].
The applicants' contentions in the application and the preliminary hearing that they seek
In par 14 of their grounds the applicants contend that the regulations and the market rules as made in 2004 'were part of a scheme by which the market was established (Scheme)'.
The applicants contend, in par 21, that the amending rules have, or are likely to have, the following effects:
(a)preventing capacity assigned to a demand side programme (being, a programme under which DSM is provided) (Demand Side Programme) from participating in auctions for Reserve Capacity conducted by the independent market regulator, while continuing to allow Generation Capacity to participate in such auctions;
(b)preventing a market participant who holds capacity credits (each being a notional unit of Reserve Capacity provided by a facility during a capacity year) (Capacity Credits) assigned to a Demand Side Programme (DSM Capacity Credits) from bilaterally trading those DSM Capacity Credits to other market participants, while continuing to allow other market participants to bilaterally trade their Capacity Credits;
(c)requiring that DSM Capacity Credits be supplied to the independent market regulator; and
(d)providing that the price for DSM Capacity Credits is to be determined under a different regulated pricing mechanism than that used for determining the price for Capacity Credits for Generation Capacity, which will result in lower prices for DSM than for Generation Capacity.
Paragraphs 22 and 23 provide:
22.The Market Rules Amendments alter the market as established by the Scheme and therefore exceed the jurisdiction of the Minister under the Minister's New Power (or otherwise) to amend the rules and exceed the statutory authority of the Minister and are invalid.
23.Further and alternatively, the Market Rules Amendments fail to conform to the Objectives in that:
(a)they discriminate against DSM, which is a particular energy option and technology in the market;
(b)they discourage the taking of measures to manage the amount of electricity used and when it is used;
(c)they discourage DSM which in the market in relation to the wholesale supply of electricity in the SWIS is more efficient than generation capacity because for the foreseeable future it can be provided at a lower cost;
(d)they are made to give effect to a policy to reduce the extent of provision of DSM in the SWIS and thereby reduce competition;
(e)they will encourage further investment in inefficient generation capacity; and
(f)they are likely to increase electricity prices to customers compared to a market in which DSM and suppliers of generation capacity are dealt with in a non‑discriminatory manner,
and therefore exceed the statutory authority of the Minister and are invalid.
The applicants submit that the grounds outlined in par 1 to 22 of the application should be dealt with by way of preliminary hearing. The respondent opposes that application.
Principles to be applied when considering ordering the determination of issues at a preliminary hearing
In deciding whether to separate trials of issues raised on the pleadings in an action commenced by a writ of summons the starting point is that ordinarily the trial of an action should include all issues arising in the action. The determination of an application for separate trials requires a careful balancing of the prospective advantages and disadvantages involved in separating the issues, bearing in mind the uncertainties inherent in litigation and that once the course of determining preliminary issues is embarked upon it may be difficult and even impossible to retreat. Experience has shown that the attraction of the separate trial of issues is often illusory. It is a course that can cause the very delay, additional expense and uncertainty of outcome it was intended to avoid. An application for the separation of issues is therefore to be approached with some caution. An order for the trial of preliminary issues should only be made where its utility, economy and fairness to the parties is clearly made out: Landsdale Pty Ltd v Moore [2009] WASCA 176 [20] ‑ [21] (Newnes JA).
In my view the same principles are to be applied in determining the applicants' application for the determination of issues at a preliminary hearing.
The applicants contend that the issues raised by pars 1 to 22 are primarily questions of statutory construction which require no or little assessment of underlying facts[2] but that the issues raised by par 23 require an assessment of the likely effect of the amending rules and the purposes their introduction, complex economic evidence and the assessment of facts.[3] The respondent contends that even on the applicants' construction of the Act and regulations the issues raised by pars 1 to 22 require substantial evidence because they involve consideration of the 'character' of the market and the effect of the amendments on that market so that the evidence required to determine the issues raised by pars 1 to 22 is not sufficiently different from the evidence required to determine the issues raised by par 23.[4]
[2] Applicants' submissions for the directions hearing on Friday 10 February 2017 [24].
[3] Applicants' submissions for the directions hearing on Friday 10 February 2017 [24].
[4] Respondent's outline of submissions for hearing on 10 February 2017 [6].
If the issues raised by pars 1 to 22 are primarily questions of statutory construction which require no or little assessment of underlying facts then it is likely that an order for the preliminary determination of those questions would be justified.
Whether the issues raised by pars 1 to 22 are primarily questions of statutory construction which require no or little assessment of underlying facts
The issues raised by pars 1 to 22 of the grounds of the application have been described by the applicants as the First Question. The First Question has been variously described by the applicants as being:
First, the market rules amendments impermissibly alter the market as established by [the regulations] and the market rules that were first gazetted on 5 October 2014.[5]
and
[T]he Minister exceeded his statutory power in making the Amending Rules as the Amending Rules did not relate to the market established by [the regulations] but instead created a new and fundamentally different market.[6]
[5] Applicants' submissions for the directions hearing on Friday 10 February 2017 [2].
[6] Affidavit of Dean Edward Grondal sworn 25 January 2017 [7]; and affidavit of Pablo Manuel Campillos sworn 25 January 2017 [14].
Paragraphs 4 to 9 of the grounds of the application refer to provisions of the Act. Paragraph 10 contains their contentions as to the proper construction of the Act, including:
(d)rules amending the market rules that were not made by regulation could not alter the character of the market established by regulation.
The applicants submit that the power to amend the market rules contained in regulation 7(4) is limited to make amendments 'that (a) did not alter the character of the Market as established and (b) were confined to setting out and dealing with matters prescribed by regulation'.[7] This submission is not based on the words of the regulation but because 'unless the power to amend is read down as being subject to these requirements of the [Act] then it is invalid'.[8]
[7] Applicants' submissions for preliminary hearing [17].
[8] Applicants' submissions for preliminary hearing [17].
It is clear that the regulation must be consistent with the Act: s 43(1) Interpretation Act 1984 (WA).
The applicants' submission that reg 7(4) must be read down in this way is based on the provisions of the Act.
The applicants submit that:
i.the regulations may provide for the establishment of the initial market rules;
ii.the regulations may also provide for the amendment or repeal and replacement of the market rules by rules made in accordance with the regulations and the market rules;
iii.it is the regulations and not the market rules that are to establish the market;
iv.the market rules are required to set out or deal with such matters as are prescribed by the regulations;
v.there is a distinction in the Act between regulations establishing the market and the market rules relating to the market as established;
vi.this distinction is important because the market rules are not subsidiary legislation;
vii.if there was to be no distinction between the establishment of the market (to be undertaken by regulation) and the making of changes to the initial market rules (which do not require the making of regulations) then changes could be make without Parliamentary scrutiny and possible disallowance.[9]
[9] Applicants' submissions for preliminary hearing [7] ‑ [12].
The issue for me to determine at this stage is whether or not the grounds outlined in pars 1 to 22 of the application be dealt with by way of preliminary hearing. I am not determining any issue raised in those grounds. However it is necessary to note that the respondent does not accept the applicants' construction of the Act. The respondent submits that s 122(1) confers power to make regulations for the purpose of establishing the market but does not mandate that the market be established by regulation and that s 123(4), which provides for both the establishment of the initial market rules and the amendment, repeal and replacement of those rules, makes clear that there is no distinction between the initial market rules and the amendment of those rules.[10]
[10] Respondent's outline of submissions for hearing on 10 February 2017 [37] ‑ [44].
If the resolution of this question of construction resolved the issues raised in the grounds outlined in pars 1 to 22 of the application then determination of them as a preliminary issue would be appropriate. However if the construction for which the applicants contend were to be correct it might not follow that I would conclude, as the applicants contend in par 22, that the market rules amendments 'alter the market as established by the Scheme and therefore exceed the jurisdiction of the' respondent.
The applicants contend that whether or not the market rules amendments impermissibly alter the market is a question of law turning on the construction of the Act, the regulations, the market rules and the amendments to the market rules.
However, it is possible that the market rules simply set out what rules the participants in the market must comply with and that the market that results from that compliance is a question of fact which requires evidence. I am not satisfied that the applicants have established the utility and economy of determining the grounds outlined in pars 1 to 22 at a preliminary hearing. I will give them the opportunity to reformulate the preliminary issue that they say should be determined.
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