Pacific Hydro Limited and Ors and Office of the Renewable Energy Regulator
[2005] AATA 752
•8 August 2005
CATCHWORDS – RENEWABLE ENERGY – hydro-electric power station – calculation of renewable energy Baseline – whether modelled on the actual amount of electricity generated in the year the power station commenced generation – meaning of “model” – meaning of “extrapolate” – intention of regulatory scheme – basis on which Baseline should be modelled – decision affirmed.
Renewable Energy (Electricity) Amendment Regulations 2001 (No. 1) Schedule 1, item 17 and r. 4
Interpretation Ordinance s. 10
Renewable Energy (Electricity) Bill 2000
Renewable Energy (Electricity) Regulations 2001 rr. 14, 15, 16 and 17; Schedule 3, cll. 1.1, 2, 2.1, 2.3, 2.4, 2.5, 3, 3.1, 3.2, 3.3, 3.3A, 4, 5 and 6.1
Acts Interpretation Act 1901 ss. 8, 15AA, 15AB and 46
Renewable Energy (Electricity) Act 2000 ss. 3, 4, 5, 8, 13, 14, 17, 18, 19, 21, 23A, 26, 27, 31, 32, 33, 35, 163 and 164
Alexandra Private Geriatric Hospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265
Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) 126
BHP Direct Reduced Iron Ore Pty Ltd v Chief Executive Officer, Australian Customs Service (1998) 55 ALD 665
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618
Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297
Director of Public Works v Ho Po Sang [1961] AC 901
Esber v Commonwealth of Australia and Another (1992) 174 CLR 430
HR Products Pty Ltd v Collector of Customs (1990) 20 ALD 340
Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186
Mathieson v Burton (1971) 124 CLR 1
Pepsi Seven-Up Bottlers v Commissioner of Taxation (1995) 62 FCR 289
Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355
R v Moodie; Ex parte Mithen (1977) 17 ALR 219
Robertson v City of Nunawading [1973] VR 819
Taylor v Public Service Board (NSW) (1976) 137 CLR 208
TCN Channel Nine Pty Ltd v Australian Mutual Provident Society (1982) 42 ALR 496
Wacando v The Commonwealth (1981) 148 CLR 1; 37 ALR 317
Whitten v Falkiner (1915) 20 CLR 118
Yager v R (1977) 13 ALR 247
Yao v Minister for Immigration and Ethnic Affairs (1996) 69 FCR 583
DECISION AND REASONS FOR DECISION [2005] AATA 752
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2003/1362
GENERAL ADMINISTRATIVE DIVISION )
Re PACIFIC HYDRO LIMITED
PACIFIC HYDRO GROUP TWO PTY LTD
ENERGIS AUSTRALIA PTY LTD
NORTHWESTERN ENERGY PTY LTD
Applicants
AndOFFICE OF THE RENEWABLE ENERGY REGULATOR
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Mr C. Ermert, Member
Date: 8 August 2005
Place: Melbourne
Decision:The Tribunal affirms the decision of the respondent dated 19 November 2003.
S A FORGIE
Deputy President
REASONS FOR DECISION
The Ord River Power Station (“Station”) is subject to the requirements of the Renewable Energy (Electricity) Act 2000 (“Act”). That Act was enacted as part of Australia’s commitment to introduce a mandatory target for the uptake of renewable energy in power supplies in order to contribute to the reduction of Australia’s greenhouse gas emissions. Among other matters, it requires the Office of the Renewable Energy Regulator (“Regulator”) to determine a 1997 eligible renewable power baseline for each power station. In broad terms, the operator of a power station may create certificates for electricity generated from renewable sources over and above that baseline in the years following the Act’s introduction. Those certificates are transferable and have a monetary value. The Station began generating electricity in 1996 but did not operate at full capacity due to various difficulties encountered during its commissioning stage. We have decided that no regard is to be had to those difficulties in determining the 1997 eligible renewable power baseline and have affirmed the Regulator’s determination.
THE ISSUE
The issue in this case is whether cl. 2.3(c) of Schedule 3 of the Renewable Energy (Electricity) Regulations 2001 (“Regulations”) requires the Baseline for the Station to be calculated by:
modelling the output of the Station in 1996 taking into account the reduced output of the Station related to its commissioning stage and other difficulties experienced during 1996, which was its first year of operation; or
modelling the output of the Station by excluding its reduced output related to the commissioning stage and other aspects of commencing generation in 1996 so that the output is modelled in a way that is representative of the typical or standard performance of the station once the commissioning stage was completed.
The parties have agreed that, if the first approach is correct, the decision under review should be set aside and a decision that the Baseline is 136,910 MWh[1] substituted. If the second approach is correct, the Baseline is 185,684 MWh and the decision should be affirmed.
[1] Megawatt hours
BACKGROUND
Many of the facts were agreed between the parties. In light of that and on the basis of the evidence, we have made the findings of fact set out in this section of our reasons.
The applicants and the contracts
There are four applicants: Pacific Hydro Limited (“Pacific Hydro”), Pacific Hydro Group Two Pty Ltd (“Pacific Hydro Group”), Energis Australia Pty Ltd (“Energis”) and Northwestern Energy Pty Ltd (“Northwestern”). Argyle Diamond Mines Pty Limited and certain of its subsidiaries and associates (“ADM”) operate the Argyle Diamond Mine. The four applicants entered a Power Purchase Agreement (“PPA”) with ADM in November 1994 to supply electricity to their mining operations. Earlier, in August 1994, it had entered a PPA with the State Electricity Commission of Western Australia (“SECWA”) that later became a corporation and was renamed Western Power. SECWA supplied electricity to its retail customers in the Kununurra region of Western Australia. The two PPAs were for the long term supply of electricity. Under them, the applicants were, and are, obliged to supply electricity first to SECWA to the limit defined by its demand curve. In 1996, the limit was 49.1 GWh.[2]
[2] Gigawatt hours
The Station
Once the PPAs were secured, the four applicants commenced construction of a dual-generator hydro electric power station with a nominal capacity of 30 MW[3] known as the Station. Construction commenced on 13 January 1995 and much of the major construction work was completed by October of that year. Both turbines were installed by 18 January 1996 but, a few days earlier, a rotor required by one of the two turbines (“Unit B”) had been dropped in transit and severely damaged. This meant that it could not be commissioned until the rotor was replaced but the commissioning of the other turbine (“Unit A”) went ahead. Using only Unit A, the Station commenced generating electricity on 1 March 1996. All of its electricity was supplied to ADM. Some weeks later, on 11 April 1996, the Station began to supply SECWA. The rotor for Unit B was repaired on 26 April 1996 and Unit B commenced generating electricity from that date. Between 26 April and late August 1996, it was rare for both Unit A and Unit B to operate at the same time. Generally, only one turbine operated at a time during that period limiting generation by approximately 40% during this period. Unit B was commissioned on 22 August 1996.
[3] Megawatts
Testing in January 1996 had also revealed another problem. The Supervisory Control and Data Acquisitions System (“SCADA”) was not operating effectively. SCADA is a computer-based communication system monitoring the operation of the Station as well as providing a link between the Station and ADM’s diesel generator. As SCADA was not operating effectively, the Station could not operate automatically and so could not supply ADM with the electricity that it had the capacity to generate. SCADA was upgraded between 30 June and 23 August 1996.
The Station is only able to generate its nominal capacity, less system losses, when the level of the Ord River Dam (or Lake Argyll) is 88 metres Australian Height Datum (“88 metres HAD”). System losses occur in transporting electricity from the Station to the customer’s facility and in transforming it from high to low voltage in the course of its being transported. In 1996, the Lake’s level was generally above 88 metres HAD except for a short period in November and December of that year. The Station’s output was also affected by the electricity demanded by ADM and SECWA and the technical capacity of the Station. In general terms, its output in the months from January to September are lower than in the months September to December. The months of February and June are particularly low. Its output is generally at its highest in October and output increases during August and September.
The Kyoto Protocol to the United Nations Framework Convention on Climate Change and the Australian Government’s response
The Kyoto Protocol to the United Nations Framework Convention on Climate Change (“Kyoto Protocol”) was agreed in December 1997 and signed by Australia on 29 April 1998. Potentially, Australia is committed to a target for national greenhouse emissions of 8% above 1990 levels by 2008-2012. Without any action being taken, the Australian Greenhouse Office predicted that Australia’s total emissions were expected to grow by 28% from 1990 to 2010. By 1997, emissions had already reached a level higher than Australia’s agreed emissions cap for 2008‑2012. Therefore, by September 1999, Australia had to achieve a 30% reduction against business-as-usual projections of greenhouse gas emissions if it were to achieve the agreed emissions cap represented for this period.[4] One of Australia’s major contributors to greenhouse gas emissions is the electricity sector.
[4] Regulation Impact Statement for the Mandatory Target for the Uptake of Renewable Energy in Power Supplies prepared by the Australian Greenhouse Office, September 1999.
Against this background, the Prime Minister announced a range of measures on 20 November 1997. Among them, the Prime Minister said:
“Targets will be set for the inclusion of renewable energy in electricity generation by the year 2010. Electricity retailers and other large electricity buyers will be legally required to source an additional 2 per cent of their electricity from renewable or specified waste-product energy sources by 2010 (including through direct investment in alternative renewable energy sources such as solar water heaters). This will accelerate the uptake of renewable energy in grid-based power applications and provide an ongoing base for commercially competitive renewable energy. The program will also contribute to the development of internationally competitive industries which could participate effectively in the burgeoning Asian energy market.”
In the Regulation Impact Statement for the Mandatory Target for the Uptake of Renewable Energy in Power Supplies prepared in September 1999,[5] the Australian Greenhouse Office noted the specific objectives of the renewable energy targets forming part of the Government’s response:
“Specific objectives of the renewable energy target are, by 2010:
to accelerate the uptake of renewable energy in grid-based applications, so as to reduce greenhouse gas emissions;
as part of the broader strategic package to stimulate renewables, provide an on-going base for the development of commercially competitive renewable energy; and
to contribute to the development of internationally competitive industries which could participate effectively in the burgeoning Asian energy market.
…
The renewables target is primarily a long-term greenhouse response measure achieved through the development of industry capacity, although it will generate direct greenhouse emission reductions in the medium term. As there is the potential for substantial emissions reductions to be required from the electricity sector in the future, occurring at the same time as growing electricity demand, a shift towards renewables will be particularly important for the electricity generation sector. However, if Australia is to position itself to cost-effectively reduce emissions in the long run by increased use of renewables, action will be required now.”
[5] Forming part of the Explanatory Memorandum to the Renewable Energy (Electricity) Bill 2000.
Accreditation of the Station and determination of the 1997 Eligible Renewable Power Baseline
On 14 March 2001, Pacific Hydro applied for accreditation of the Station under s. 13 of the Act. Pacific Hydro then wrote to the Regulator asking that Pacific Hydro Group, Energis and Northwestern be joined as parties to its application. The Regulator accredited the Station on 24 July 2003. At the same time, he determined that the 1997 Eligible Renewable Power Baseline for the Station (“Baseline”) would be 143.838 GWh for 2001 and 191.784 GWh for all subsequent years.
Following Pacific Hydro’s request to review her decision, a delegate of the Regulator amended the Station’s Baseline to 139.263 GWh for 2001 and 185.684 GWh for 2002 and all subsequent years. The delegate made her decision on 19 November 2003 and Pacific Hydro applied for review of her decision in the Tribunal on 11 December 2003.
LEGISLATIVE FRAMEWORK
The Act applies to the year commencing on 1 January 2001 and to all subsequent years.[6] It provides “… for the establishment and administration of a scheme to encourage additional electricity generation from renewable energy sources …”,[7] to reduce emissions of greenhouse gases and to ensure that renewable energy sources are ecologically sustainable.[8] In summary, the Act achieves its purpose by:
“… issuing … certificates for the generation of qualifying electricity and requiring certain purchasers (called liable entities[[9]]) to surrender a specified number of certificates for the electricity that they acquire during a year.
Where a liable entity does not have enough certificates to surrender, the liable entity will have to pay renewable energy shortfall charge.”[10]
No certificates can be created and no liability can arise in respect of electricity generated on or after 1 January 2021.[11] The reference to “qualifying electricity” is a shorthand reference to electricity generated by an accredited power station in excess of its Baseline.[12]
[6] Act, s. 4
[7] Act, Long Title
[8] Act, ss. 3(a) and (b)
[9] A “liable entity” is a person who, during a year, makes either a wholesale acquisition or a notional wholesale acquisition of electricity: Act, ss. 5(1) and 35. A “wholesale acquisition” is explained in s. 32 and a “notional wholesale acquisition” in s. 33 of the Act. Both forms of acquisition must also comply with the provisions of s. 31.
[10] Act, s. 3
[11] Act, s. 4
[12] Act, s. 18
Certificates are created in two ways. First, they are created by persons who are registered[13] and who generate electricity from accredited power stations[14] using renewable energy resources where the electricity they generate is greater than the relevant Baseline determined under s. 14 of the Act.[15] A certificate may be created for each whole megawatt hour (“MWh”) generated during a year in excess of the Baseline.[16] The amount of electricity generated by an accredited power station is to be worked out in accordance with the Regulations.[17] Certificates can also be created for approved installations of solar hot water heaters[18] and for small generation units[19] but they are not relevant to the consideration of the issues in this case. Certificates may be created immediately after the generation of the final part of the electricity in relation to which it was created.[20] The Regulator must register a certificate when it is created in order to be valid.[21] It may be transferred[22] but any transfer must be registered. As the certificates have a commercial value, their transfer can provide a secondary stream of income to a registered person generating electricity from an accredited station. Once a certificate has been surrendered by a liable party, it ceases to be valid.[23]
[13] A person may be registered by the Regulator in accordance with Division 2 of Part 2 of the Act.
[14] Once registered, a person may apply for accreditation of a particular electricity generation system owned by that person: Act, s. 13.
[15] Act, s. 18 and see also s. 8 when read with ss. 5(1) and 14
[16] Act, s. 18(1)
[17] Act, s. 18(3). Electricity generated using energy sources that are not eligible renewable energy sources as defined in s. 17 is excluded from all calculations made under s. 18: Act, s. 18(4).
[18] Act, s. 21
[19] Act, s. 23A
[20] Act, s. 19
[21] Act, s. 26(1)
[22] Act, s. 27
[23] Act, s. 8
Application for accreditation of a power station is made to the Regulator. A power station is eligible for accreditation if it generates all or some of its power from eligible renewable power sources and if it satisfies any prescribed requirements.[24] If the Regulator decides that the power station is eligible for accreditation, he must also determine the Baseline for that power station as well as any energy sources used by the power station that are not eligible renewable energy sources.[25] The Regulator must determine those issues “… in accordance with the guidelines prescribed in the regulations.”[26] In addition:
“To avoid doubt:
(a)the regulations may provide that a power station includes the components that are integral to the operation of the power station or to the generation of electricity by the power station; and
(b)the 1997 eligible renewable power baseline for a power station may be nil.”[27]
[24] Act, s. 14(2)
[25] Act, s. 14(3)
[26] Act, s. 14(4)
[27] Act, s. 14(5)
Regulation 5 of the Regulations provides that:
“For subsection 14(4) of the Act, the guidelines for determining the 1997 eligible renewable power baseline for a power station are set out in Schedule 3.”
Schedule 3 of the Regulations is entitled “Guidelines for 1997 eligible renewable power baselines”. Clause 1.1 provides that the eligible renewable baseline for a power station generating electricity for the first time after 1 January 1997 is nil. For 2001, a Baseline is taken to be ¾ of the baseline worked out for a power station.[28] That allows for the fact that the Act did not apply to electricity generated before 1 April 2001.[29]
[28] Regulations, Schedule 3, cl. 6.1
[29] Act, s. 163 and see also s. 164
Clause 2 of Schedule 3 is headed “Default baselines” and sets out a number of ways in which the Baseline may be determined. The first relates to power
stations that generated electricity before 1 January 1997. For them, the eligible renewable power baseline for is:
“… the average of the annual electricity generated from eligible renewable energy sources in 1994, 1995 and 1996 (the reference period), worked out in accordance with Subdivision 2.3.1.”[30]
If the amount of electricity generated was not worked out in accordance with Division 2.3.1 of Part 2 of the Regulations, that amount is to be estimated from the measurements that were made and worked out in accordance with that Subdivision.[31]
[30] Regulations, Schedule 3, cl. 2.1
[31] Regulations, Schedule 3, cl. 2.2
Regulation 14 provides for the way in which the amount of electricity generated by an accredited power station is worked out. It provides:
“(1) The amount of electricity generated in a year is:
TLEG – FSL – AUX – (DLEG x (1 – MLF))
where:
AUX is the auxiliary loss in the year, in MWh.
DLEG is the amount of electricity, in MWh, sent from the generator in the year, measured:
(a)for a power station in a national electricity market – at the point determined under the National Electricity Code; or
(b)in any other case – at the point determined by an authority of the State or Territory where the power station is.
FSL is the amount of electricity in MWh, generated in the year, that is attributable to any fossil fuels used in generating electricity or preparing fuel.
MLF is the marginal loss factor, to allow for the amount of electricity lost in transmission networks, applied:
(a)for a power station in the national electricity market – by NEMMCO; or
(b)in any other case – by an authority of the State or Territory where the power station is.
TLEG is the total electricity, in MWh, generated at the generator terminals in the year.
(2)If all the electricity generated by a power station is used in the power station or in the local distribution network, the marginal loss factor is taken to be 1.”
Provision is also made for power stations using fossil fuels[32] or energy sources that are not eligible renewable energy sources.[33] Hydro-electric generation is the subject of r. 17 but rr. 17(1), (2) and (3) apply only to inter-connected hydro-electric systems for which a 1997 renewable energy baseline has been determined. Regulation 17(4) provides that:
“For a hydro-electric power station or system that uses pumped storage, the auxiliary losses of the power station or system include the amount of electricity that is used to pump or to raise water before its release for hydro‑electric generation.”
[32] Regulations, r. 15
[33] Regulations, r. 16
Clause 2 of Schedule 3 sets out further ways to determine the Baseline. If a power station did not generate electricity continuously in 1994, 1995 and 1996, cl. 2.3 provides:
“… the Regulator may:
(a)if it generated electricity for at least 24 months in that period:
(i)extrapolate the measurement of the electricity generated; or
(ii)in consultation with the registered person for the power station, model the output of the station over the months in which electricity was not generated; and
(b)if electricity was generated for less than 24 months in that period, in consultation with the registered person for the power station, model output over the months in which electricity was not generated, based on fuel use, plant capacity and plant technology; and
(c)if it started to generate electricity, or increased its generation capacity, in that period, model the output of the station over the year in which generation started or generation capacity increased.”
If a power station sold electricity intermittently in 1994, 1995 and 1996, the “… Regulator may consider the level of operation at a particular time to be representative of the full year’s production”[34] but “… only if the intermittent nature of the production was caused by cyclical availability of fuel.”[35]
[34] Regulations, Schedule 3, cl. 2.4
[35] Regulations, Schedule 3, cl. 2.5
Clause 3 of Schedule 3 is headed “Special baselines”. When the Regulations commenced on 6 February 2001, cl. 3.1 provided that:
“A registered person may apply to the Regulator, or the Regulator may decide, to determine a 1997 eligible renewable energy baseline for the power station to be determined over a more statistically relevant period from that set out in clause 2.”
Since its amendment, by item 17 of the Renewable Energy (Electricity) Amendment Regulations 2001 (No. 1) (“Amendment Regulations”), cl. 3.1 reads:
“A registered person may apply to the Regulator, or the Regulator may decide, to determine a 1997 eligible renewable energy baseline for the power station to be determined in a manner different from that set out in clause 2.”
Clause 3.2 has also been amended. The provision in its current form is shown in italics and those portions that have been deleted by amendment are shown in bold italics in square brackets:
“The Regulator may determine a 1997 eligible renewable power baseline in a manner different from that set out in clause 2 if:
[(a) electricity generation by the power station is linked to seasonal variations of longer than 3 years and measurement for 1994, 1995 and 1996 would not be representative of average levels of generation; or]
(a)electricity generation by the power station is linked to seasonal variations of longer than 3 years; or
(aa)measurement for 1994, 1995 and 1996 would not be representative of 1997 levels of generation; or
(b)in 1994, 1995 or 1996, there were major changes to the infrastructure or operating environment of the power station; or
(c)determining the baseline in accordance with clause 2 would cause hardship for the registered person; or
(d)the amount of electricity generated by the power station before 1994 was significantly different from that granted in 1994, 1995 and 1996 for reasons other than the capacity of the power station, demand for electricity or other operating constraints; or
(e)in 1994, 1995 or 1996 the electricity generation capacity or output of the power station was significantly reduced by unplanned outages or other operating constraints; or
(f)an action or policy of the Commonwealth government directly reduces a power station’s ability to generate electricity for a sustained period.”
Clause 3.3 sets out the matters that the Regulator must take into account in determining a Baseline different from that set out in cl. 2. It was repealed with effect from 23 August 2001 and replaced by new cll. 3.3 and 3.3A. In its original form, cl. 3.3 provided:
“In determining a 1997 eligible renewable power baseline in a manner different from that set out in clause 2, the Regulator should take into account:
(a)the need for the baseline to be representative of electricity generation by the power station in the period used to determine the baseline; and
(b)the generation capacity of the power station in the period used to determine the baseline; and
(c)the load requirements of the power station in the period used to determine the baseline; and
(d)any other matters that might have affected electricity generation by the power station in the period used to determine the baseline; and
(e)any other information provided by the registered person about the electricity generated by the power station before 1994 or after 1997; and
(f)whether the number of certificates that could be created for electricity generated by the power station would be affected by determining the baseline in accordance with clause 2 instead of this subclause.”
The substituted cl. 3.3 reads:
“In determining a 1997 eligible renewable power baseline in a manner different from that set out in clause 2, the Regulator should take into account:
(a)the need for the baseline to be representative of the amount of energy the power station could have produced in 1997 under normal conditions; and
(b)the generation capacity of the power station; and
(c)the amount of electricity the power station has had to generate to meet the requirements of the electricity supply system; and
(d)any other matters that might have affected electricity generation by the power station; and
(e)any other information provided by the registered person about electricity generated by the power station.”
Clause 3.3A was also added and it reads:
“For subclause 3.3, the Regulator may take into account information about 1997 or later years.”
The Amendment Regulations commenced on 23 August 2001. Clause 4 of the Amendment Regulations provides that “Items 14 to 17, 34 and 35 of Part 2 of Schedule 7 of the Renewable Energy (Electricity) Regulations 2001 as in force immediately before 23 August 2001 continue to apply to solar hot water heaters, mentioned in those items, that were installed before gazettal.”
THE EVIDENCE
Calculations of the 1997 Eligible Renewable Power Baseline for the Station
There have been various calculations of the Baseline. The earliest was dated July 2003 and was prepared by Mr Michael Stacey, the Principal of URS Australia Pty Ltd.[36] He had been given 4½ years of data commencing in March 1996 and ending in December 2000. He excluded the data for the period from March to August 1996 on the basis that it is not representative of normal generation for the Station. Commencing with the data in September 1996, Mr Stacey considered that it would be reasonable to model under cl. 3 of Schedule 3 of the Regulations using one of three possible periods: 4, 36 and 52 months. He selected the four month period from September to December 1996 as he “… interpreted the words ‘model the output of the station over the year in which generation started or generation capacity increased’ to mean model using the data from that year …”.[37] That gave him a baseline of 191,784 MWh. Modelling over a 36 and 52 month period starting on 1 September 1996 gave baselines of 196,102 and 196,718 MWh respectively. Both are within 2.5% of the baseline reached on the four month period.
[36] Exhibit 1 at 90-94
[37] Exhibit 1 at 93
The second is dated 21 July 2003 was prepared by Mr Walter Gerardi of McLennan Magasanik Associates Pty Ltd.[38] He calculated a Baseline of 193,222 MWh. This compared with an average over the period 1997 to 2000 of 197,130 MWh.
[38] Exhibit 1 at 98-100
While not purporting to give a legal interpretation of cl. 2.3(c), Mr Gerardi interpreted:
“… the clause as requiring the regulator to model the generation over the whole year in which a generator commenced generation or increased its capacity. The calculation would reflect what the generator would have generated over the year if it had commenced generation at the start of that year.”[39]
[39] Exhibit 1 at 98
He did not use the data for the period March to August 1996 as it was likely to represent the effects of testing or outages of the Station during commissioning. September 1996 appeared to be low when compared with what could have been expected had the Station been fully operational. There was, however, another year in which there had been a low level of generation in September. Therefore, Mr Gerardi included September 1996 in his calculation. For the months of January to August, he used the average of the generation levels for each month over the years 1997 to 2000. This seemed reasonable to him as the total generation from January to August varied from 122 GWh in 1997 to 138 GWh in 1998 and averaged 129G Wh over the four years. From September to December 1996, Mr Gerardi used the actual generation levels for that period. A total of 15.98 GWh was generated in this period compared with an average generation over the same period in the years 1997 to 2000 of 16.96 GWh. There is a difference of 6% between the two figures.
Mr Gerardi reviewed his calculations of the Baseline in his witness statement dated 6 August 2004. He noted that the “… concept of ‘modelling’ is not the exclusive province of economics and it is possible to apply the ordinary dictionary meaning of ‘model’ to the Regulation to arrive at a sensible and workable interpretation of the Regulation.”[40] If “modelling” were understood in its economic sense, it “… includes quantifying the causal factors in order to explain what could have happened in a specific circumstance. Determining which causal factors are relevant to the modelling process is, to a degree, a matter of discretion.”[41] Mr Gerardi considered that it was possible to establish what the Station would have been expected to generate over the whole of 1996 using a simple simulation technique. On that basis, he calculated the generation in 1996 to be approximately 182,000 MWh, which was 6% lower than the figure of 193,000 MWh calculated using the backwards extrapolation method.[42] Alternatively, using trend analysis to estimate monthly generation for the first eight months of 1996 and assuming full generation capacity from 1 January 1996, Mr Gerardi estimated a generation level of 191,000 MWh.[43]
[40] Exhibit 3 at [19]
[41] Exhibit 3 at [20]
[42] Exhibit 3 at [38]
[43] Exhibit 3 at [39]
In reviewing the decision, the Regulator’s delegate, Ms Karla Wass, calculated the Baseline to be 185,684 MWh for 2002 and all subsequent years.[44] She considered a number of variations on modelling the Baseline but concluded that the modelling underpinning the Regulator’s initial decision was correct provided it was modified by a “seasonality impact overlaid on the calculated data set.”[45] That modelling had taken the generation data from September to December 1996 as its basis. Data prior to September 1996 was excluded from the calculation on the grounds that it was not representative of the normal and statistically representative generation levels of the power station and its inclusion would not result in a baseline that promoted the objects of the Act and the Regulations. There was a relatively stable generation pattern after August 1996. A seasonality pattern was determined by drawing on data from 1997 to 2000. That seasonality pattern was applied to the data from September to December 1996 to calculate a full year generation level.
[44] Exhibit 1 at 169-178
[45] Exhibit 1 at 175
Mr Philip Laurence Williams is an Economist and the full-time executive chairman of Frontier Economics. He prepared a report in October 2003 and revised it in April 2004 calculating the Baseline. Mr Williams undertook two modelling approaches:
“The first was a top down modelling methodology whereby the output of the Ord during the months January to August was estimated based on average monthly generation patterns (from actual 1997 to 2002 generation data) which is assumed to represent typical seasonal variations in output; and,
The second was a bottom up modelling approach whereby the output of the Ord was modelled explicitly from the load faced and any constraints placed upon its operation.
Each approach incorporated the effect of seasonality and the introduction of the SCADA system in August on the baseline.”[46]
[46] Exhibit B at PLW-2 at 1
Mr Williams first calculated the Baseline after adjusting for seasonality and teething outages and deducting the operation of the Argyle diesel generators to meet load swings up until 22 August 1996 and deducting the adjustment for the SCADA upgrade. He calculated the Baseline to be 103,780 MWh on what he called the top down modelling approach.[47] This approach provided, Mr Williams wrote, a “reality check” on the results of the bottom up approach. The bottom-up approach reflects a more detailed estimation of the output of the Station had it been operating during the entire calendar year of 1996.[48] That approach resulted in Mr Williams’ estimating the Baseline to be 112,320 MWh.
[47] Exhibit B at PLW-2 at 5
[48] Exhibit B at PLW-2 at 11
Mr Grant Gilroy Lewis is an engineer specialising in process control and SCADA Systems for power stations and traffic management systems as well as project planning and control and project management. He stated that the nature and extent of the commission testing required in any hydro-electric power station depends on the complexity of the systems and their components in that power station. Systems must be tested individually and in combination with other systems. Mr Lewis described those tests. The SCADA used at the Station describes the unit control, station control, unit coordination and power coordination system rather than just a supervisory control system that is the usual task of a SCADA system. It is essential to the continued operation of the Station which is not part of a national grid and so cannot rely on other electricity generators should it fail to produce electricity.
What is meant by the term “modelling”?
We have already referred to some of Mr Gerardi’s evidence regarding the concept of “modelling”.[49] He added that:
“21. To be useful as an economic concept, modelling also requires a purpose. The purposes of modelling could be a number of things including:
21.1To understand the key underlying drivers or variables affecting a system.
21.2To use this understanding to explain the consequences of changes to the variables in the system.
21.3To explain or estimate what might have occurred or what could occur in that system under alternative circumstances.
22.It is my opinion that ‘modelling the output of the station over the year in which the generation started’ requires consideration of what power the station would have been expected to generate over the whole of that year, had it been in commercial operation for the whole year.”[50]
[49] at [31] above
[50] Exhibit 3
Mr Williams also canvassed the meanings given to the word “modelling”.[51] He stated in his affidavit that it has two distinct meanings in economics. The first is that of creating a version of a more general theory. Economic theorists use the general framework of established economic theory to develop explanations or models of particular types of behaviour. The second, and more common, meaning given to the word, Mr Williams said, is that of quantifying or calibrating a particular model to calculate the value or significance of a phenomenon. An economist will translate an explanation or understanding of a phenomenon into a series of variables and relationships between and among variables. Once the model is constructed, an economist will quantify the causal factors in order to explain and/or to forecast what may occur in the future. The process of assigning values to the causal factors is the modelling process.
CONSIDERATION
[51] Exhibit B
Applicable legislation
The parties agreed that we should consider the issues in light of the Regulations before they were amended by the Amendment Regulations. We are mindful that it is not possible for the Tribunal to acquire jurisdiction through the parties’ agreeing that it has jurisdiction.[52] It is not possible to do so on their agreeing that a clear statutory precondition, on which the Tribunal’s jurisdiction depends and of which the Tribunal has to be independently satisfied, has been fulfilled.[53] We are also mindful that the Tribunal’s task is to reach the correct or preferable decision. As the majority of the High Court said in Esber v Commonwealth of Australia and Another:[54]
“The Tribunal was required to stand in the shoes of the decision-maker (the delegate) and arrive at its own decision (16).[[55]] In Drake, Bowen CJ and Deane J said of the Tribunal (16):[[56]]
‘The question for the determination of the Tribunal is not whether the decision which the decision maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.’”[57]
In view of our task, we consider that we must also come to a decision as to the applicable law. Unless we do that, we cannot reach the correct decision let alone the preferable decision were we required to exercise a discretion.
[52] R v Moodie; Ex parte Mithen (1977) 17 ALR 219 at 225 per Stephen, Aickin and Murphy JJ
[53] Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186 at 195 per Bowen CJ.
[54] (1992) 174 CLR 430
[55] Drake v Minister for Immigration (1979) 24 A.L.R. 577 at 589
[56] Drake v Minister for Immigration (1979) 24 A.L.R. 577 at 589
[57] (1992) 174 CLR 430 at 440 per Mason CJ, Deane, Toohey and Gaudron JJ, Brennan J dissenting
When we consider the applicable law on the basis both of the transition provisions in the Amendment Regulations and on general principles relating to accrued rights, we find ourselves in disagreement with the position reached by the parties. Although the question of the applicable law was raised at the hearing, it was not fully addressed. Rather than ask the parties to make further submissions, we have set out our reasons for reaching a contrary view. We have then considered the issues in light of the law as it applied both before and after the Amendment Regulations. As it turns out, we reach the same conclusion on both bases.
Taking the transition provisions first, we note that r. 4 of the Amendment Regulations specifically provides that “Items 14 to 17, 34 and 35 of Part 2 of Schedule 7 of the Renewable Energy (Electricity) Regulations 2001 as in force immediately before 23 August 2001 continue to apply to solar hot water heaters, mentioned in those items, that were installed before gazettal.” These items were either omitted or substituted by the Amendment Regulations. The transition provision makes no reference to the application of the other amendments and, in omitting to do so, leads us to conclude that the amendments were intended to take effect immediately.
Turning now to principles related to accrued rights, we note that the applicants lodged their application for accreditation of the Station on 14 March 2001. The Regulator made his decision regarding accreditation on 23 July 2003 and so well after the Amendment Regulations had come into effect on 23 August 2001. His decision was determined by his deciding whether or not the Station was eligible for accreditation. It did not require him to exercise any discretion. His determination of the Baseline is a different matter. He had to make his determination in accordance with the guidelines set out in the Regulations. Application of those guidelines incorporated a measure of discretion in some circumstances and not in others.
Taking as an example a power station generating electricity before 1 January 1997, the Baseline was the average of the annual electricity generated from eligible renewable energy sources in 1994, 1995 and 1996 worked out in accordance with Subdivision 2.3.1. While there may be discussion and disagreement as to the final figure reached in calculating the annual electricity that was generated from those sources, the determination of the figure is not a matter of discretion. By way of contrast, the guidelines the Regulator must apply in other circumstances may require the exercise of his discretion. If, for example, the amount of electricity generated was not measured in the manner provided by the Regulations, the Regulator must estimate it. An estimate inherently requires the exercise of a discretion even if the determination of the range within which that estimate may fall is not. The same is true of extrapolation. Quite apart from the discretions inherent in the various approaches set out in cll. 2 and 3 of Schedule 3 of the Regulations, the Regulator has a discretion as to which approach he will adopt to determine the Baseline.
Once it is decided that a discretionary decision is involved and there are no transition provisions to the contrary, the authorities appear clear. An application seeking the exercise of a discretionary power of the sort given to the Regulator does not create a right so that there is a corresponding duty on the Regulator to decide it in accordance with the law as it applied when the applicants made their application to him i.e. on 14 March 2001. They had only “a power to take advantage of an enactment”[58] and they had exercised that power. The Regulator then had an obligation to make a decision but not in accordance with the Act or Regulations as they were in force at the time the application was made.
[58] Mathieson v Burton (1971) 124 CLR 1 at 23 per Gibbs J
That this is so is apparent from those cases that have considered the preservation of rights when legislation is repealed or amended and a person has made an application for the exercise of a discretionary power. As the Full Court of the Supreme Court of Victoria said in Robertson v City of Nunawading[59] in relation to an application to a council for approval of a plan for subdivision of commercial land:
“If the conclusion is justified (as it appears to be) that the mere taking of procedural steps under a statute in the expectation of achieving a benefit from an administrative authority does not create a right to the continuance of the proceedings after the repeal of the statute, then the conclusion seems equally justified that the mere taking of such procedural steps does not create a right to the continuance of the proceedings unaffected by amendment of the statute.”[60]
[59] [1973] VR 819 (Winneke CJ, Gowans and Starke JJ)
[60] [1973] VR 819 at 826
In reaching its conclusion, the Full Court referred to a judgment of the Privy Council in Director of Public Works v Ho Po Sang[61] when their Lordships considered s. 10 of the Interpretation Ordinance. That section is in substantially the same terms as s. 8 of the Acts Interpretation Act 1901 (“AI Act”). The Privy Council said:
“ It is to be observed that under s. 10(e) a repeal is not to affect any investigation, legal proceeding or remedy ‘in respect of any such right.’ The right referred to is the right mentioned in section 10(c), i.e., a right acquired or accrued under a repealed enactment. This part of the provisions in paragraph (e) of section 10 does not and cannot operate unless there is a right as contemplated in paragraph (c). It may be, therefore, that under some repealed enactment a right has been given but that in respect of it some investigation or legal proceeding is necessary. The right is then unaffected and preserved. It will be preserved even if a process of quantification is necessary. But there is a manifest distinction between an investigation in respect of a right and an investigation which is to decide whether some right should or should not be given. Upon a repeal the former is preserved by the Interpretation Act. The latter is not. Their Lordships agree with the observation of Blair-Kerr J. that: ‘It is one thing to invoke a law for the adjudication of rights which have already accrued prior to the repeal of that law; it is quite another matter to say that, irrespective of whether any rights exist at the date of the repeal, if any procedural step is taken prior to the repeal, then, even after the repeal the applicant is entitled to have that procedure continued in order to determine whether he shall be given a right which he did not have when the procedure was set in motion.”[62]
[61] [1961] AC 901
[62] [1961] AC 901 at 922
In BHP Direct Reduced Iron Ore Pty Ltd v Chief Executive Officer, Australian Customs Service,[63] Carr J declined to express a concluded view as to whether an application for a tariff concession under the Customs Act 1901 led to its having an accrued right within the meaning of s. 8 of the AI Act. The application called upon the Chief Executive Officer of Customs to exercise his discretionary power. His Honour:
“… respectfully share[d] the doubts raised by the full court in Yao[[64]] that, where a discretion is involved (in contrast to an entitlement) a right may not be said to have been accrued …”[65]
[63] (1998) 55 ALD 665
[64] Yao v Minister for Immigration and Ethnic Affairs (1996) 69 FCR 583
[65] BHP Direct Reduced Iron Ore Pty Ltd v Chief Executive Officer, Australian Customs Service (1998) 55 ALD 665 at 695
Once the applicants had lodged their application in the Tribunal for review of that decision, a different conclusion would be reached. They had the same right as the applicant in Esber v Commonwealth of Australia and Another[66] even though Mr Esber claimed redemption of his weekly compensation payments and the applicants applied for accreditation and the determination of a Baseline:
“… Once the appellant lodged an application to the Tribunal to review the delegate's decision, he had a right to have the decision of the delegate reconsidered and determined by the Tribunal. It was not merely ‘a power to take advantage of an enactment’ (18).[[67]] Nor was it a mere matter of procedure (19);[[68]] it was a substantive right (20)[[69]]. …”[70]
[66] (1992) 174 CLR 430 (Mason CJ, Deane, Toohey and Gaudron JJ, Brennan J dissenting)
[67] Mathieson v. Burton (1971), 124 C.L.R. 1, at p. 23, per Gibbs J.; and see Robertson v. City of Nunawading, [1973] V.R. 819
[68] see Newell v. The King (1936), 55 C.L.R. 707, at pp. 711-712
[69] see, by way of analogy, Australian Coal and Shale Employees Federation v. Aberfield Coal Mining Co. Ltd. (1942), 66 C.L.R. 161, at pp. 175, 178, 185, 194; Colonial Sugar Refinery Co v. Irving, [1905] A.C. 369, at pp. 372-373
[70] (1992) 174 CLR 430 at 440
Selecting the basis for calculating the Baseline under cl. 2 of Schedule 3
Clauses 1, 2 and 3 set out a range of means by which the Regulator may work out the Baseline. Some are not applicable. Clause 1, for example, is not relevant as the Station did not generate electricity for the first time after 1 January 1997. It first generated electricity on 1 March 1996 and, for that reason, it would be inappropriate to determine its Baseline under cl. 2.1 by reference to the average of the electricity it generated in the years 1994, 1995 and 1996. The Station comes within the ambit of cl. 2.3 as it did not generate electricity continuously during those years. It does not, however, come within cl. 2.3(a) as it did not generate electricity for at least 24 months in the period covered by 1994, 1995 and 1996. It does, though, come within the ambit of cl. 2.3(b) as it generated electricity for less than 24 months and cl. 2.3(c) as it started to generate electricity in that period. Clause 3 may also be relevant.
The Regulator did not choose to apply cl. 2.3(b) and the applicants did not quarrel with that. We have not been able to find any reason for their adopting this approach other than the applicants’ preference that the Regulator adopt the approach in cl. 2.3(c) of Schedule 3 of the Regulations. Even so, we agree that the decision to reject cl. 2.3(b) as a basis was correct. In the period 1994 to 1996, the Station had generated electricity for a period of only ten months as it had started generating on 1 March 1996. Therefore, it had not only generated electricity for a period less than 24 months but for a period that was substantially less than 24 months. Its period of generation did not extend beyond a calendar year. While the Station’s circumstances fit the circumstances described in cl. 2.3(b), it is not a comfortable fit. Indeed, it is not as comfortable a fit as cl. 2.3(c), which much more accurately describes the Station’s circumstances. Clause 2.3(c) applies to a station that started to generate electricity in the period 1994 to 1996 and that is the precise circumstance of the Station. Subject to the operation of cl. 3.2, it is appropriate to determine the Baseline under cl. 2.3(c).
As for cl. 3.1, the applicants have not applied to the Regulator to determine a Baseline either in a more statistically relevant manner, as the provision read, or in a manner different from cl. 2. As cl. 3.1 was previously enacted, it was difficult to know whether or not cl. 3.2 provided a different avenue that the Regulator could choose if he were minded not to follow any in cl. 2 or whether the Regulator could only decide to determine a Baseline outside cl. 2 if one of the paragraphs of cl. 3.1 were satisfied. As cl. 3.1 is currently enacted, it is much clearer. On its face, it is apparent Parliament intends that the Regulator may only decide to determine a Baseline outside cl. 2, whether on application by a registered person or on his own motion, if one or other of the paragraphs of cl. 3.2 is satisfied. Reference to the Explanatory Statement[71] accompanying the Regulations makes it clear that cll. 3.1 and 3.2 as initially enacted were intended to be read in the more limited manner and not to provide a further avenue.
[71] Regard may be had to the Explanatory Statement in the interpretation of Regulations: AI Act, ss. 15AB and 46(1).
Given this interpretation of cl. 3.2 with cl. 3.1, we are not satisfied on the evidence that we have that the circumstances of the Station came within any of the paragraphs. Clause 3.2(c) might, in other circumstances have been relevant but neither party wished to rely on it. Given their agreement as to the appropriate Baseline depending on our view of the interpretation of cl. 2.3(c), we consider it inappropriate to pursue this aspect, or any aspect, of cl. 3 further.
The interpretation of cl. 2.3(c): the submissions
On behalf of the applicants, Mr Houghton QC with Mr Horgan of counsel submitted that the Regulator’s decision has been reached by reference to what is “normal”, “typical” or “statistically representative” of the Station’s output even though none of those concepts is found in cl. 2.3(c) and each is inconsistent with its plain meaning. In excluding losses through testing and commissioning losses, the Regulator is ignoring the requirement to model its output “… over the year in which generation started”. Mr Houghton submitted that regard should be had to those losses. Averaging of the annual electricity generated over a three period in respect of a power station generating electricity before 1 January 1997 in accordance with cl. 2.1 requires regard to be had to the actual generation of electricity and so to the subjective circumstances of a power station. The task of extrapolation under cl. 2.3(a)(i) also requires regard to be had to actual generation in order to determine a figure for generation in the months in which there was no generation. The same can be said of modelling required by cll. 2.3(a)(ii) and 2.3(c).
Doing so, Mr Houghton submitted, is consistent with the objects of the Act that include encouraging the additional generation of electricity from renewable resources. It is consistent because it will result in the determination of a lower Baseline. A lower Baseline will lead to the applicants’ being able to create more certificates than if the Regulator were to determine a higher Baseline for the Station. By creating more certificates, the applicants will have the opportunity to gain additional funds and to invest those additional funds in increasing capacity. If the Regulator’s interpretation of cl. 2.3(c) were accepted, the applicants would have the opportunity to create fewer certificates and so have fewer resources to invest in increasing the Station’s capacity.
Mr Hanks QC with Dr Beard of counsel submitted that modelling under cl. 2.3(c) should provide a Baseline that identifies a power station’s generating capacity immediately before 1 January 1997. In that way, the Baseline provides a standard against which increases in generation can be measured and rewarded. The concept of modelling does not exclude those of averaging and extrapolating as modelling is directed to devising a simplified description or a phenomenon or system. In this case, the system is a power station. Averaging is undoubtedly an appropriate form of modelling where a power station has generated electricity continuously for three years. Extrapolation is an appropriate form of modelling where the power station has not generated electricity continuously. The modelling contemplated by cll. 2.3(a)(ii) and 2.3(b) is directed to producing a description of a hypothetical system to determine the output over the months in which electricity was not generated. Each method is directed towards working out the generating capacity of a power station as at 1 January 1997.
The use of extrinsic material in interpreting the Act
We have begun our consideration of cl. 2.3(c) by reference to the context in which the clause appears and the context in which the Regulations were made and the Act, under which they were made, was enacted. As stated by Mason and Wilson JJ in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation:[72]
“… The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[73]
[72] (1981) 147 CLR 297
[73] (1981) 147 CLR 297 at 320
Regard may be had to the context in which legislation was enacted to ascertain the mischief that Parliament intended to remedy and so ascertain the legislative intent:
“ It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure …. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy …. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain meanings of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent …”.[74]
[74] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618 at 408; 634-5 per Brennan CJ, Dawson, Toohey and Gummow JJ
In addition to CIC Insurance Ltd v Bankstown Football Club Ltd, a number of cases have considered the use that may be made of extrinsic material e.g. Wacando v The Commonwealth;[75] TCN Channel Nine Pty Ltd v Australian Mutual Provident Society;[76] and Alexandra Private Geriatric Hospital Pty Ltd v Blewett.[77] In Wacando v The Commonwealth which, like TCN Channel Nine Pty Ltd v Australian Mutual Provident Society, was decided before the introduction of s. 15AB of the AI Act, Mason J acknowledged that the inadmissibility of parliamentary debates as an aid to the construction of statutes is supported by
powerful authority. He distinguished the Minister’s statement, or Second Reading Speech as it is known, in introducing a Bill:
“… But there is a case for treating the Minister’s statement, particularly when it is not contested, as cogent evidence of the mischief aimed at, evidence as cogent as the extrinsic sources from which the court would draw an inference in many cases.”[78]
[75] (1981) 148 CLR 1; 37 ALR 317 at 25-26; 335-6 per Mason J
[76] (1982) 42 ALR 496 at 507-508 per Bowen CJ, Lockhart and Ellicott JJ
[77] (1984) 2 FCR 368; 56 ALR 265 at 375-6; 271-2 per Woodward J
[78] (1981) 148 CLR 1; 37 ALR 317 at 25; 335
Woodward J decided the case of Alexandra Private Geriatric Hospital Pty Ltd v Blewett after the enactment of s. 15AB but preferred to rely on TCN Channel Nine Pty Ltd v Australian Mutual Provident Society. He did so because he was not concerned with “the interpretation of a provision of an Act”[79] but with the:
“… determination of the policy underlying the part of an Act which includes particular provisions granting powers, in order to determine what restrictions are to be implied on the exercise of those powers.”[80]
His Honour decided that it was appropriate to consider Hansard reports and any other relevant material as an aid in determining Parliament’s true intent.
[79] AI Act, ss. 15AB(1) and (2)
[80] (1984) 2 FCR 368; 56 ALR 265 at 375; 272
Mason J could equally have distinguished s. 15AA on the same basis. It had come into operation on 12 June 1981 and so some three years before s. 15AB and was also concerned with “the interpretation of a provision of an Act”. Section 15AA(1), which is now s. 15AA, provided that:
“In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”
The then s. 15AA(2), which was repealed with effect from 12 June 1984,[81] provided that s. 15AA(1) did not authorise consideration of any matter not forming part of the Act. Since the amendment of s. 15AA in 1984, it clearly supports the approach taken by the authorities to which we have referred.
[81] Acts Interpretation Act Amendment Act 1984, s. 6
Consequently, we have had regard to the Explanatory Memorandum to the Renewable Energy (Electricity) Bill 2000 to assist us to ascertain the purpose of the Act. We have already included passages from that document above. We do not have regard to it in isolation for we must also interpret the words of a provision in the context of that provision as well as in the context of the Act as a whole. The meaning and operation of one word “… must be read and accommodated to the rest of the section[82] as well as “… by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[83] It must also be remembered that:
“… if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient and unjust.”[84]
[82] Taylor v Public Service Board (NSW) (1976) 137 CLR 208 at 213 per Barwick CJ
[83] Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297 at 320 per Mason and Wilson JJ and see also Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 per McHugh, Gummow, Kirby and Hayne JJ.
[84] Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297 at 305 per Gibbs CJ
Regard may also be had to s. 15AB of the AI Act. It provides, in so far as it is relevant and subject to s. 15AB(3), that:
“… in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a)to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b)to determine the meaning of the provision when:
(i)the provision is ambiguous or obscure; or
(ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or unreasonable.”
Section 15AB(1) makes it clear that consideration “may” be given to extrinsic material but that it is not required. Section 15AB(3) specifies the matters that should
be included in any consideration of whether or not to consider extrinsic material or what to give weight it. Those matters are:
“(a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act; and
(b)the need to avoid prolonging legal or other proceedings without compensating advantage.”
The material which may be considered includes:
“any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted.”[85]
Included in the Explanatory Memorandum is a Regulation Impact Statement for the Mandatory Target for the Uptake of Renewable Energy in Power Supplies prepared by the Australian Greenhouse Office in September 1999. That falls within the scope of s. 15AB(2)(e).
[85] AI Act, s. 15AB(2)(e)
What are the ordinary meanings of the words “model” and “extrapolate”?
The word “model” is not defined in the Act and so we must consider its meaning. The general rule is that evidence may not be admitted to establish the ordinary meaning of a word or phrase. As Jordan CJ explained in Australian Gaslight Co v Valuer-General: [86]
“The question what is the meaning of an ordinary English word or phrase as used in the statute is one of fact not of law … The question is to be resolved by the relevant tribunal itself, by considering the word in its context with the assistance of dictionaries and other books, and not by expert evidence … although evidence is receivable as to the meaning of technical terms … and the meaning of a technical legal term is a question of law …”
[86] (1940) 40 SR (NSW) 126 at 137
Determining whether a word has a trade or technical meaning is a question of fact and evidence is admissible (Whitten v Falkiner[87] and see also HR Products Pty Ltd v Collector of Customs[88] and Pepsi Seven-Up Bottlers v Commissioner of Taxation[89]). Whether or not that word is intended to be given that trade or technical meaning or another is a question of law (HR Products Pty Ltd[90] and see also Yager v R[91]). Hill J summarised the circumstances in which evidence of the meaning of a technical term can be given in Pepsi Seven-Up Bottlers v Commissioner of Taxation.[92]
[87] (1915) 20 CLR 118 at 127 per Isaacs J
[88] (1990) 20 ALD 340 at 342 per Lee J
[89] (1995) 62 FCR 289 at 299 per Hill J
[90] (1990) 20 ALD 340 at 342 per Lee J
[91] (1977) 13 ALR 247 at 249 per Barwick CJ
[92] (1995) 62 FCR 289 at 298-299
On the basis of the evidence that we have been given, we are satisfied on the basis of the evidence of both Mr Gerardi and Mr Williams, we find that the word “model” has a technical meaning when used in an economic context. The Act and the Regulations are not, however, an economic context but an environmental context. Having examined the ordinary meanings of the word as we do in the following paragraphs and having considered the evidence, we are satisfied that the word “model” is not used in any sense different from its ordinary meanings.
We have moved then to the ordinary meaning of the word “model”. We have begun by setting out those of the ordinary meanings that various dictionaries have given to the word “model” and that may be used in a context such as that of the Regulations.
The meanings given in the Macquarie Dictionary[93] to the word when used as a transitive verb, as it is in cl. 2.3(c), include:
“…10. to form or plan according to a model. 11. to give shape or form to; fashion. 12. to make a model or representation of. …”
The meanings of the word “model” when used as a noun include:
“… 1. a standard or example for imitation or comparison; a pattern. …”
[93] Macquarie Dictionary, 3rd edition, 1997
The Oxford English Dictionary Online[94] gives more detailed definitions of “model”. Some are said to be obsolete and these include:
[94] Oxford University Press, 2005
“… 2. … a. To present in outline or as a model; to portray or describe in detail. …
1604 M. DRAYTON Moyses II. 57 Afflicted London, … When thy affliction seru’d me for a booke, Whereby to model Egipts miserie. …
b. To construct a model or theory of the structure of. …
1667 MILTON Paradise Lost VIII. 79 When they come to model Heav’n And calculate the Starrs….”
Other meanings are not obsolete and among them is this meaning:
“10. trans. a. To devise a (usually mathematical) model or simplified description of (a phenomenon, system, etc.). Cf. MODEL n. 8a. Cf. sense 2b.
1957 Jrnl. Royal Statist. Soc. B. 14 160 Our intention throughout has been to choose mathematical models for their convenience exactly in so far as we are ignorant of the probable true behaviour of what is being modelled. 1960 Jrnl. Royal Statist. Soc. B. 22 242 In order to obtain complete predictive accuracy the model would be no simpler than what was being modelled, and would not be a model. …”
The definition draws our attention to the following meaning of “model” as a noun:
“8. a. A simplified or idealized description or conception of a particular system, situation, or process, often in mathematical terms, that is put forward as a basis for theoretical or empirical understanding, or for calculations, predictions, etc.; a conceptual or mental representation of something. Freq. with modifying word. …
1901 Jrnl. Royal Statist. Soc. 64 392 If this symbolism, this model, is too complex to admit of the application of existing mathematical apparatus, then a simplification is effected by omitting one complicating condition after another, until the symbolic model is brought within the range of the measuring capacities of the investigator. 1906 Jrnl. Philos., Psychol. & Sci. Methods 3 537 The physical scientist selects among these mathematical models such as will enable him best to manipulate or anticipate his facts. …”
There are no relevant meanings given in Chambers 21st Century Dictionary[95] of the word “model” when used as a transitive verb but those given for the word when used as a noun include:
“…6 a thing from which something else is to be derived; a basis. …”
[95] revised edition 1999
In considering the meaning to be given to the word “model” in cl. 2.3(a) it is relevant also to consider the meanings of the word “extrapolate” that is used in cl. 2.3(a) together with the word “model”. Furthermore, the applicants submit, among other matters, that the Regulator has confused the task of extrapolation with that of modelling. The Macquarie Dictionary defines the word “extrapolate”, when used as a transitive verb, as:
“… 1. Statistics to estimate a quantity which depends on one or more variables by extending the variables beyond their established ranges. 2. to infer (what is not known) from that which is known; conjecture. …”
The Oxford English Dictionary Online defines it to mean:
“… 2. a. In mathematical or scientific calculations, to estimate the values of (a function or series) outside a range in which some of its values are known, on the assumption that the trends followed inside the range continue outside it; to continue (a curve) on the basis of points already plotted on the graph; …
1874 W.S. JEVONS Princ. Sci. II. xxii. 120 If we wish to assign by reasoning results lying beyond the limits of experiment, we may be said, using an expression of Sir George Airy, to extrapolate. …”
The meanings given in Chambers 21st Century Dictionary of the word “extrapolate” when used as a transitive verb include:
“…tr & intr 1 math to estimate (a value that lies outside a known range of values), on the basis of those values and usually by means of a graph. 2 to make (estimates) or draw (conclusions) from known facts. …”
The interpretation of cl. 2.3(c) of Schedule 3
Having regard to s. 3 of the Act alone, it is clear that the Act is intended to encourage the additional generation of electricity from renewable sources as well as to reduce emissions of greenhouse gases and to ensure that renewable energy sources are ecologically sustainable. This is consistent with statements made in the Explanatory Memorandum. What is not clear from s. 3 itself is whether the focus is on the additional generation of electricity from the renewable sources already used in its generation, from renewable sources not already used or from both existing and new renewable sources. If s. 3 were simply to stand alone, it would be difficult to say from which benchmark additional electricity generation is to be calculated. It does not, however, stand alone. It stands as one of the provisions in a carefully crafted set of regulatory provisions found in the Act and the Regulations establishing the system permitting the creation of certificates by those generating electricity, their transfer and their surrender by liable entities purchasing electricity. Furthermore, it stands against a background of the Explanatory Memorandum.
Looking first at the Explanatory Memorandum, we note that it includes the Prime Minister’s statement on 20 November 1997. He said that targets would be set “… for the inclusion of renewable energy in electricity generation by the year 2010.” Electricity retailers and large purchasers of electricity would be “… required to source an additional 2 per cent of their electricity from renewable or specified waste-product energy sources by 2010”. Both statements clearly point to a focus on increasing the use of both existing and new renewable sources in generating electricity. The focus is not solely upon the additional generation of electricity from existing sources. That this is so is confirmed when regard is had to other passages in the Explanatory Memorandum referring to the wider context in which the Act was passed and the Regulations were made. Those passages refer to the Kyoto Protocol and to the need to achieve a 30% reduction of greenhouse gas emissions against what were current business-as-usual predictions in September 1999. As it was also recognised that one of the major contributors to greenhouse emissions was the generation of electricity, it follows that it is intended that a factor underpinning the regulatory scheme found in the Act and the Regulations is the need to increase the use of renewable sources to generate electricity and not simply the generation of increased amounts of electricity from renewable sources.
When we have regard to the regulatory scheme itself, it becomes apparent that this is indeed the factor underpinning it. That is because it becomes apparent from the provisions of cl. 2, either alone or when read with either version of cl. 3, that it is the amount of electricity that a power station could have generated and made available to consumers to meet their normal demands[96] from existing eligible renewable sources in 1997 to which regard is to be had in calculating the Baseline. Regard is not to be had to the actual amount generated in that year. It is not necessarily its output when it is operating at its peak capacity for the legislation recognises that there are many factors that affect output. It was its normal output if the station were operating as it should.
[96] We say “available to consumers” because the formula set out in s. 14(1) of the Act for calculating electricity generated in a year deducts auxiliary loss in the year and takes into account the marginal loss factor to allow for the amount of electricity lost in transmission networks.
We have reached that conclusion on three bases. First, if it were only the actual amount, to which regard were had, there would be no need to resort to Schedule 3 of the Regulations at all. Regard would need to be had only to r. 14 setting out the formula calculating the amount of electricity generated from non-fossil fuels in a year. It allows for deductions but those deductions take account only of those amounts that are lost or unavailable for consumption.
The second basis for our conclusion is found in the detail of cl. 2 itself. That it is not the actual amount generated to which regard is to be had is clear from the first, and clearest, of the options for calculating the Baseline set out in cl. 2.1. That clause provides that the Baseline is the average of the electricity generated from eligible renewable sources in 1994, 1995 and 1996. It does not provide that it is the actual amount generated in 1997. In prescribing an “average”, cl. 2.1 looks for the “usual or typical amount …”[97] of electricity that would be generated in any one year in that three year period and not for the actual amount that was generated in 1997. Of course, the actual amount of electricity actually generated in each year has first to be measured in accordance with Subdivision 2.3.1 before an average can be calculated. If it has not been measured in that manner, it is estimated. Even if estimated, the determination of the Baseline remains an annual average of the electricity generated measured over a three year period. It is not an estimate of that which was actually generated in 1997.
[97] Chambers 21st Century Dictionary, revised edition 1999
If the power station did not generate electricity continuously over the three year period, the effect of cl. 2.3(a) is that the Baseline remains an average of the electricity that would have been generated over a three year period had it generated continuously over those years. The amount of electricity that would have been generated in its non-operative months is estimated by reference to the output over other months and so by extrapolation using cl. 2.3(a)(i) or by modelling using cl. 2.3(a)(ii). It is apparent from the meanings of the word “modelling” that, in the context of cl. 2.3(a)(ii), it means the creation of a pattern or basis for calculating what would have been the output of a power station had it generated electricity in those periods in which it did not do so for whatever reason. That is the same meaning to be attributed to it in cl. 2.3(b) as well. Regard is not had to the actual output of electricity but to the electricity that could have been expected to have been generated had the power station generated electricity at all. That amount is modelled on the particular power station for it must be based on a particular power station’s fuel use, plant capacity and plant technology.
Clause 2.3(c) does not require averaging of annual electricity generated in 1994, 1995 and 1996. Instead, it requires the modelling of the output of the power station concerned in two situations. One is that with which we are concerned; i.e. the power station started to generate electricity. The other comes about when a power station’s generation capacity has increased. In permitting modelling of a power station’s output in the year in which it increased its capacity, Parliament is clearly pointing to the amount of electricity that a power station could have generated and made available to consumers to meet their normal demands from existing eligible renewable sources in 1997 rather than to the actual amount generated in that year.
The third basis for our conclusion is cll. 3.1 and 3.2 of Schedule 3 of the Regulations whether in their original or current form. In its original form, cl. 3.1 provided that the Baseline could be determined over a more statistically relevant period from that set out in cl. 2. It now provides that the Baseline may be determined in a manner different from that set out in cl. 2. In its original form, it is not clear from cl. 3.1 alone what would be a statistically relevant period. Clause 3.2 provided that the Regulator may determine the Baseline in a manner different from that in cl. 2 and it is clear from the circumstances set out in cll. 3.2 and 3.3 that Parliament was searching for a means that represented the amount of electricity that a power station had the capacity to generate and make available to consumers from existing eligible renewable sources in 1997 rather than to the actual amount generated in that year. It was also clear that regard was to be had to what would normally be the case for regard could be had to circumstances affecting the power station and the amount of electricity it generated. That remains the case in the amended forms of cll. 3.2 and 3.3 although it is now even clearer. That results from the reference in new cl. 3.3(a) to the requirement that the Regulator take account of the need for the Baseline to be representative of the amount of energy the power station could have produced in 1997 under normal conditions.
Decision
Having reached the conclusion that Parliament has intended the Baseline to reflect the amount of electricity that a power station could have generated and made available to consumers to meet their normal demands from existing eligible renewable sources in a given period rather than to the actual amount generated in that year, we have concluded that this should be reflected in the way in which the output of the Station is “modelled” over 1996. That would mean that it should not take account of reduced output related to the commissioning stage and other difficulties faced in the first year of operation. That accords with the approach taken by the Regulator and we affirm his decision dated 19 November 2003.
I certify that the eighty preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie and
Mr C. Ermert, Member
Signed: ...............................................................
Nathaniel Wills Associate
Date of Hearing 7 and 8 December 2004
Date of Decision 8 August 2005
Counsel for the Applicants Mr W.T. Houghton QC with Mr S.R. Horgan
Solicitor for the Applicants Mr M. Algie
Baker McKenzie
Counsel for the Respondent Mr P. Hanks QC with Dr J. Beard
Solicitor for the Respondent Ms V. Masters
Australian Government Solicitor
12
0