Manawa Energy Ltd v Electricity Authority - [2022] NZHC 1444

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-367

[2022] NZHC 1444

UNDER the Judicial Review Procedure Act 2016

IN THE MATTER OF

an application for judicial review of a

decision of the Electricity Authority pursuant to the Electricity Industry Act 2010 and the Electricity Industry Participation Code 2010 to issue new guidelines for the development of a new transmission pricing methodology

BETWEEN

MANAWA ENERGY LIMITED

Applicant

AND

ELECTRICITY AUTHORITY

First Respondent

Continued . . .

Hearing: 18 to 22 and 26 to 27 October 2021

Counsel:

J E Hodder QC, B A Davies and A M B Leggatt for the Applicant D A Laurenson QC, J H Stevens and L J Hardcastle for the First

Respondent

J D Every-Palmer QC and T Mijatov for the Second Respondent Appearances excused for the First Interested Party

I R Millard QC and J A Tocher for the Second Interested Party M N Dunning QC for the Third Interested Party (by VMR)

T D Smith and C J Edwards for the Intervener

Judgment:

20 June 2022

JUDGMENT OF PALMER J

MANAWA ENERGY LIMITED v ELECTRICITY AUTHORITY [2022] NZHC 1444 [20 June 2022]

Continued . . .

MERIDIAN ENERGY LIMITED

Second Respondent

AND

NEW ZEALAND STEEL LIMITED

First Interested Party

NOVA ENERGY LIMITED

Second Interested Party

FONTERRA CO-OPERATIVE GROUP LIMITED
Third Interested Party

AND

TRANSPOWER NEW ZEALAND

Intervener

Solicitors:
MinterEllisonRuddWatts, Wellington Bell Gully, Wellington
Meridian Energy Ltd, Wellington Franks Ogilvie, Wellington
Fonterra Co-operative Ltd, Auckland Nova Energy Limited, Wellington Chapman Tripp, Wellington

Contents

Summary................................................................................................................. 1

Electricity Transmission pricing regulation......................................................... 1

Phases of regulation  2
Electricity Industry Act 2010  6
Empowering framework for the Code  8
The Electricity Industry Participation Code 2010  10

The 2020 Guidelines 12

The application for judicial review..................................................................... 15

The parties 15
Approach to judicial review 17

Issue 1: Statutory objective and role.................................................................. 22

Relevant provisions 22

Submissions 23
The Authority’s statutory objective and role 26

Issue 2: Pre-determination and bias................................................................... 39

Relevant law of pre-determination and bias 39

Submissions 40

Was the 2020 Decision biased or pre-determined? 42

Issue 3: Cost-benefit analysis.............................................................................. 46

The use of cost-benefit analyses 46
Relevant law of cost-benefit analysis 47

Submissions 48
Cost-Benefit Analysis 51

Issue 4: Other challenges to the residual charge............................................... 58

The residual charge 59
Relevant considerations, irrelevant considerations and unreasonableness 63

An unlawful tax 66

Material error of fact 67

Relief...................................................................................................................... 67

Result..................................................................................................................... 68

Summary

[1] Virtually all New Zealanders use electricity. Most electricity in New Zealand is transmitted by Transpower New Zealand Ltd (Transpower) from its point of generation to wholesale suppliers, who then transmit it to retail suppliers. As a natural monopoly, Transpower’s pricing affects the whole electricity industry and the allocation of some $800 million of charges each year. It is accordingly subject to regulation by the Electricity Authority (the Authority). In 2020, the Authority issued guidelines (the Guidelines) under the Electricity Industry Act 2010 (the Act) for Transpower to develop a Transmission Pricing Methodology (TPM). Different entities…

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: [2022] NZHC 1444
Decision Date: 20 June 2022

CaseChat Overview and Summary

The case of Manawa Energy Ltd v Electricity Authority is a judicial review of a decision made by the Electricity Authority under the Electricity Industry Act 2010. The Authority issued guidelines for the development of a new transmission pricing methodology, which was challenged by Manawa Energy Ltd, with support from New Zealand Steel Ltd, Nova Energy Ltd, and Fonterra Co-Operative Group Ltd. The challenges focused on the Authority's interpretation of its statutory objective, the use of cost-benefit analysis, and the imposition of a residual charge.

The court found that the Authority did not misconceive its statutory objective or role, and that there was no evidence of bias or pre-determination in the decision-making process. The court also held that the Authority's use of cost-benefit analysis was not unlawful, as the Act does not require quantification at all, let alone quantification to a particular standard, or quantification of each element of the Guidelines. The court found that the Authority's decision in relation to the residual charge did not take into account irrelevant considerations or fail to take into account relevant considerations, did not impose an unlawful tax, was not based on a material error of fact, and was not unreasonable.

Overall, the court held that the challenges to the Authority's decision largely reflected the challengers' disagreement with it and sought to draw the Court into the economic merits of the decision. However, it is the Authority's role, not the Court's, to assess the merits of the competing policy arguments. The application for judicial review was dismissed.

Orders