TEC Pipe Pty Ltd and Clean Energy Regulator - [2017] AATA 48

TEC Pipe Pty Ltd and Clean Energy Regulator [2017] AATA 48 (20 January 2017)
Division:GENERAL DIVISION
File Number: 2016/1731
Re:TEC Pipe Pty Ltd
APPLICANT

Clean Energy RegulatorAnd
RESPONDENT

DECISION
Tribunal:Justice D Kerr, President
Senior Member CR Walsh
Date:20 January 2017
Place:Perth

The Tribunal affirms the decision under review.
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Justice D Kerr, President
CATCHWORDS
RENEWABLE ENERGY SHORTFALL CHARGE – large-scale generation shortfall charge - meaning of the defined term “standby plant” - whether the six electricity generators owned and operated by the Applicant were “standby plant” for each of the “immediately preceding 3 years” - whether the Applicant’s “relevant acquisition” in the 2014 assessment year was not a “relevant acquisition” because it was delivered on a grid “that is not, directly or indirectly, connected to a grid that has a capacity of 100MW or more”- whether the Applicant was a “liable entity” in the 2014 assessment year - decision under review affirmed
LEGISLATION
Renewable Energy (Electricity) Act 2000 (Cth) – ss 3, 26, 27, 30P(3), 31(1), 31(2)(a), 31(3), 32, 32(2), 33, 33(2), 35, 36(1), 38, 44, 44(1)(a), 44(1)(b), 44(2), 45B, 46(1), 47(6), 48A(6)
Renewable Energy (Electricity) Regulations 2000 – rr 3(1), 3(1)(a), 22, 22(a), 22(b)
CASES
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27
Australian Education Union v Department of Education and Children’s Services (2012) 248 CLR 1; [2012] HCA 3
Esso Australia Resources Pty Ltd v Federal Commissioner of Taxation (2011) 199 FCR 226
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 87 ALJR 98; [2012] HCA 55
Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 87 ALJR 588; [2013] HCA 16
Halford v Price [1960] HCA 38, (1960) 105 CLR 23
Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12
Project Blue Sky Inc and Others v Australian Broadcasting Authority (1998) 194 CLR 355
Sea Shepherd Australia Ltd v Federal Commissioner of Taxation (2013) 212 FCR 252; [2013] FCAFC 68
Segelov v ErnstPty Ltd [2015] NSWCA 156
Taylor v The Owners – Strata Plan No 11564 (2014) 88 ALJR 473; [2014] HCA 9
The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404
SECONDARY MATERIALS
Explanatory Memorandum to the Renewable Energy (Electricity) Bill 2000
Macquarie Dictionary Online, 6^th Edition, Macmillan Publisher Australia, 2015
REASONS FOR DECISION
Justice D Kerr, President
Senior Member CR Walsh
20 January 2017
INTRODUCTION

The Applicant, TEC Pipe Pty Ltd (TEC Pipe), owns and operates a power station known as the “Solomon Power Station” (the Solomon Power Station), which is an islanded off-grid power station located in the Pilbara, Western Australia, adjacent to the “Solomon Hub” mining area, being an area mined by FMG Solomon Pty Limited (FMG Solomon), a wholly-owned subsidiary of Fortescue Metals Group Ltd.
The Solomon Power Station comprises six electricity generators, namely four Solar Turbine Titan Mobile…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] AATA 48
Decision Date: 20 January 2017

CaseChat Overview and Summary

The Administrative Appeals Tribunal considered a dispute between TEC Pipe Pty Ltd and the Clean Energy Regulator concerning the assessment of a renewable energy shortfall charge. TEC Pipe sought to challenge the Regulator's decision to confirm an earlier decision that TEC Pipe was a liable entity for a relevant acquisition of electricity in the 2014 assessment year. The core of the dispute revolved around the classification of the electricity generators at the Solomon Power Station.

The legal issues before the Tribunal were whether the six electricity generators owned and operated by TEC Pipe constituted "standby plant" for the immediately preceding three years, and consequently, whether TEC Pipe's electricity acquisitions in the 2014 assessment year were "relevant acquisitions" under the Renewable Energy (Electricity) Act 2000 (Cth) (REE Act). This involved determining the capacity of the Solomon Power Network and whether TEC Pipe qualified for an exemption as an end-user generator.

The Tribunal affirmed the Regulator's decision, finding that the six generating units of the Solomon Power Station did not meet the definition of "standby plant" under sub-regulation 3(1) of the Renewable Energy (Electricity) Regulations 2001. The Tribunal reasoned that the term "standby plant" should be interpreted in light of its plain and ordinary meaning and industry practice, which indicated a purpose of guarding against supply failure or providing backup power. The evidence, including TEC Pipe's own licence applications, demonstrated that the six generators were intended as the main supply system for the Solomon Power Network, not as backup. Furthermore, even if they were considered standby plant, their generation output exceeded the threshold specified in the definition. Consequently, the Solomon Power Network's capacity was found to be greater than the 100MW threshold, and TEC Pipe was determined to be a liable entity.

The Tribunal affirmed the decision under review.

Orders

Orders of the court

The Tribunal affirms the decision under review.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

On 11 March 2016, the Regulator notified TEC Pipe of its decision to “confirm” the Original Decision (the Reviewable Decision).[9] [9] ibid. In the “Statement of reasons for decision” ( “Attachment A” to the Reviewable Decision), the Regulator stated the following in relation to the issue of whether six generators which comprise the Solomon Power Station constitute “standby plant” as defined in r 3(1) of the Regulations:31.Applying regulation 22 of the REE Regulations to the Solomon Power Network, the grid’s capacity is the sum of all its installed electricity generation capacity excluding installed electricity generation capacity in the form of a “standby plant” or a “privately owned domestic generator”.32.If the Solomon Power Network is considered not to include installed electricity generation capacity which is either a standby plant or a privately owned domestic generator, then the Network had, in 2014, a capacity of 136MW (being the total capacity of all its installed generation capacity). However, TEC Pipe asserts that, during the 2014 assessment year, the Network;a.had installed electricity generation capacity which was comprised solely of standby plants; andb.when the capacity of the standby plants is excluded from the calculation of the electricity generation capacity of the Network, then the capacity of the Network is zero for the relevant period; andc.if the capacity of the Network is zero, then paragraph 31(2)(a) of the REE Act would apply such that any acquisitions of electricity delivered to an end user on the Network could not be “relevant acquisitions” for the purposes of REE Act.33.In its application for internal review, TEC Pipe contends that the definition of “standby plant” in sub-regulation 3(1) of the REE Regulations should be read narrowly, particularly that the phrase “electricity generator” should be read to mean each electricity generation unit that comprises the Solomon Power Station. However, as McHugh J said in the High Court of Australia’s decision in Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216, nothing “is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment”.34.In my view, the term “standby plant” needs to be interpreted appropriately. To do this requires me to have regard not only to the context of the legislative scheme as a whole, but to the plain and ordinary meaning of the term, industry practice and understanding of the term; and the configuration/operation of the power station in question. 35.In my view, the inclusion of a definition of “standby plant” in the legislation is not intended to displace the plain and ordinary meaning of the term. The plain and ordinary meaning of the term should be used, with the additional material set out in the definition of “standby plant” in sub-regulation 3(1) providing technical context to provide an upper limit on what could be considered a “standby plant”.36.The term “standby plant” is defined in the Electrical Engineer’s Reference Book (14th edition) as follows:18.4.4 Standby plantIn the UK, where there is a closely interconnected system with numerous generating stations, standby plant is not necessary as part of the main supply system. Individual large consumers, e.g. important manufacturers, hospitals, pumping installations, etc., may, however, consider it desirable to install standby plant to guard against a supply failure. The required outputs do not usually exceed a few hundred kW, and diesel plant, which can be started almost instantaneously, is usually provided for this duty.There are circumstances where a load centre is supplied by an overhead transmission line from a distant hydro-electric station, and standby plant may then form part of the main system. Diesel plant, or steam turbine plant with quick-starting forced circulation boilers, has been used in such cases.[Source: Electrical Engineer’s Reference Book (14th edition), edited by M A Laughton and M G Say, 1st published 1945; this edition 1985 (1990 reprint), Butterworths & Co (Publishers), London; [reference omitted] 37.In my view, a “plant” can have multiple generation units, it is my view that the term “standby plant” (as used in the REE Regulations) is not meant to refer to individual generation units that ordinarily comprise the standard generation units of a power station. Nor is it meant to refer to the power station as a whole. In my view, the words “electricity generator” (as used in the definition of “standby plant” in sub-regulation 3(1) of the REE Regulations) is meant to refer only to those electricity generator units that guard against a supply failure by providing a backup power supply when the standard generation units fail.38.In my view, the text of sub-regulation 3(1) must be read as a whole; that the words “standby plant” and “electricity generator” need to be read in conjunction with each other. A “plant” can therefore be made up by one or more generators. Even if the Solomon Power Station was not the sole source of supply (e.g. backup power supply when the standard generation units fail) to the Solomon Power Network, I am satisfied that the legislative intent was that the six generating units that form the Solomon Power Station would form a single “plant”. As shown in the table in paragraph 11 above, the six generating units as a single “plant” generated 209.77GWh in 2014, which is more than the 50GWh of electricity each per year for the three consecutive years immediately preceding 2014 that is required for the Solomon Power Station to meet the definition of “standby plant” in sub-regulation 3(1) of the REE Regulations.39.In this regard, I am not satisfied that it is open to TEC Pipe to claim that because each of its six generating units produced less than 50GWh for the 2014 assessment year that the Solomon Power Station is a “standby plant” for the purposes of the Renewable Energy (Electricity) legislation. In addition to the material supplied to the Clean Energy Regulator by TEC Pipe, it is clear from the documentation it submitted to the Western Australian Government to obtain a licence to operate the Solomon Power Station that the six generating units were intended as the main supply system for the Solomon Power Network. They were not intended, individually or collectively, to operate as a standby plant, in the sense that it would only be operated to guard against supply failure by providing a backup power supply.40.For example, on 10 September 2012, TEC Pipe applied to the Economic Regulation Authority (WA) [footnote omitted] for an Integrated Regional Licence to operate the Solomon Power Station (Attachment D), generate electricity and sell it to FMG Solomon Pty Ltd. After referring to the two GE LM6000PF dual fuel gas turbines (initially configured for diesel combustion) and four Solar Turbine TITAN 130-20501 dual fuel gas turbines (initially configured for diesel combustion), the application refers to a “black start generator” in the following terms:The black start generator is a 2.5 MVA diesel driven generator that is energised in the event of a complete loss of power. The generator is used to start and maintain essential auxiliary equipment and systems required for a gas turbine to re-start, for example gas turbine lube oil pumps and diesel fuel pumps.This generator will not be used during the normal course of operation, but it will be tested regularly to ensure that it is serviceable and available, if ever needed.41.I am satisfied that the “black start generator” would not only meet the statutory definition of a “standby plant” but aligns with the plain and ordinary meaning of this term and industry practice. However, the six gas turbines would not.42.Similarly, the Department of Environment Regulation (Government of Western Australia) under the Part V of the Environmental Protection Act1986 (WA) has issued a licence to allow TEC Pipe to operate the Solomon Power Station (Attachment E [footnote omitted]). The power station has been categorised as a Category 52 (electric power generation) premises, being “Electric power generation: premises (other than premises within category 53 or an emergency or standby power generating plant on which electrical power is generated using a fuel”.43.This licence regulates the operation of a 134.4 MWe power station under Part V of the Environmental Protection Act 1986 (WA). The power station is located within the Solomon Iron Ore Mine in the Pilbara Region. During construction of the mine, FMd Solomon Pty Ltd gained approval to construct a 134.4 MWe Power Station to supply the mine’s power needs (W5104/2011/1). The licence also states that FMG Solomon Pty Ltd has since sold the power station to TEC Pipe.…Conclusions55. For the reasons outlined above, I am satisfied that:a.the capacity of the Solomon Power Network is greater than the 100MW threshold allowed for in subsection 31(2) of the REE Act, when calculated in accordance with regulation 22 of the REE Regulations;b.none of the six generating units of the Solomon Power Station meet the definition of “standby plant” in sub-regulation 3(1) of the REE Regulations. The six Solomon Power Station electricity generating units were not intended, individually or collectively, to operate as a standby plant, in the sense that it would only be operated to guard against supply failure or provide a backup power supply;c.even if the Solomon Power Station can be regarded as a “standby plant” in the sense that it is only operated to guard against supply failure or provide a backup power supply (which I do not accept), the six generating units that comprise the “plant” generated 209.77GWh in 2014, which is more than the 50GWh of electricity each per year for the three consecutive years immediately preceding 2014 that is required for the Solomon Power Station to meet the definition of “standby plant” in sub-regulation 3(1) of the REE Regulations;d.TEC Pipe is a liable entity for a relevant acquisition of electricity, referred to in subsection 31(1) of the REE Act, delivered on the Solomon Power Network during 2014. TEC Pipe Pty Ltd does not meet the requirements of the end user generator exemption in paragraph 31(2)(b) of the REE Act; ande.TEC Pipe is, therefore, a liable entity for the purposes of the REE Act.(emphasis added)

Ratio Decidendi

Legal Principle Established

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