Trustpower Ltd (formerly Bay Energy) v Electricity Authority
[2016] NZHC 2914
•2 December 2016
For a Court ready (fee required) version please follow this link
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2016-485-580 [2016] NZHC 2914
BETWEEN TRUSTPOWER LIMITED (FORMERLY
BAY ENERGY) Applicant
AND
ELECTRICITY AUTHORITY First Respondent
MERIDIAN ENERGY LIMITED Second Respondent
Hearing: 14 and 15 September 2016 Appearances:
J Farmer QC and B A Davies for applicant
A R Galbraith QC and L A OʼGorman for first respondent
J D Every-Palmer and T Mijatov for second respondentJudgment:
2 December 2016
JUDGMENT OF CULL J
Contents
Introduction ........................................................................................................................................................ [1] PART I: BACKGROUND TO THE PROCEEDING ...................................................................................... [5] The parties......................................................................................................................................................... [10] The regulatory framework............................................................................................................................... [14] The Code ........................................................................................................................................................... [16] The Charter....................................................................................................................................................... [20] The TPM process to date.................................................................................................................................. [30] The Authority’s strategy announcement ......................................................................................................... [39] The Consultation Papers .................................................................................................................................. [42] The TPM Paper ............................................................................................................................................. [43] The DGPP Paper........................................................................................................................................... [44] Trustpower’s requests ...................................................................................................................................... [45] Further Consultation Opportunity.................................................................................................................. [48] PART II: THE PARTIES’ POSITIONS .......................................................................................................... [49] Trustpower’s position ....................................................................................................................................... [49] Grounds of review ......................................................................................................................................... [52] The process has “gone off the rails” ............................................................................................................. [57] Consultation was inadequate ........................................................................................................................ [60]
The Authority’s position................................................................................................................................... [67]
TRUSTPOWER LIMITED v ELECTRICITY AUTHORITY [2016] NZHC 2914 [2 December 2016]
Meridian’s position ........................................................................................................................................... [74] Reviewability of a procedural decision ........................................................................................................... [78] PART III: ANALYSIS ...................................................................................................................................... [82] The Authority’s duty of consultation .............................................................................................................. [86] Court’s intervention at a preliminary stage.................................................................................................. [100] Has this decision-making process gone seriously off the rails? ................................................................... [108] Conclusion ....................................................................................................................................................... [117] Result ............................................................................................................................................................... [125] APPENDIX 1 – CONSULTATION PROCESS FOR DEVELOPING THE TPM (FIGURE 8)
Introduction
[1] Trustpower has applied for judicial review of the “process decisions” of the Electricity Authority (the Authority) refusing to grant Trustpower’s request for extensions of time for written submissions, cross-submissions and an oral hearing on two consultation papers, which were promulgated by the Authority in May 2016 to industry participants. They are:
(a) Transmission Pricing Methodology: second issues paper (the TPM Paper) dated 17 May 2016; and
(b) Review of distributed generation pricing principles consultation paper
(the DGPP Paper) dated 17 May 2016.1
[2] The Authority has received submissions from industry participants, including Trustpower, but has not yet made substantive decisions in relation to the May consultation papers. In seeking to review the Authority’s procedural decision, Trustpower contends that the consultation process was meaningless, being limited, insufficient and inadequate. The Authority in reply submits that the decision is not reviewable because the substantive decision has not yet been made.
[3] Meridian Energy (Meridian) as intervenor and second respondent, joins the Authority in submitting that the application for judicial review is premature. In the alternative, both the Authority and Meridian submit that the decisions about consultation were not unlawful or unreasonable.
[4] The judgment is divided into three parts. Part I explains the background to the proceeding and the regulatory framework of the electricity industry. Part II describes the parties’ positions and the actions of the Authority to date. Part III analyses the issues and explains the reasons for my decision.
PART I: BACKGROUND TO THE PROCEEDING
[5] The electricity industry in New Zealand is regulated by the Authority, which governs the electricity market under the Electricity Industry Act 2010 (the Act). The
1 These papers are referred to as “the May consultation papers”, when not referred to individually.
electricity industry is divided into the following functional areas: generation, transmission, distribution and retail. The Authority has published a diagram, which illustrates the different functions within the industry.2
[6] Originally, the New Zealand electricity supply was sourced from local authorities and industrial plants providing their own electricity supply. This form of electricity supply is now known as “distributed generation”.
[7] The Government became involved in the supply of generation and transmission in 1914.3 In the 1950s, the New Zealand Electricity Department increased the national infrastructure and on-sold wholesale electricity and transmission services to local authorities on a bulk supply tariff. Various payment structures were used for the bulk supply tariff, but charges based on peak demand were an important component of the pricing structure applied to local authorities.
Local authorities on-sold wholesale energy to customers, on their local networks, sourced from a mix of wholesale purchases from the state-owned grid connected generation and from their own distributed generation.
[8] In the late 1980s and 1990s, the New Zealand Electricity Department was progressively restructured into a separate transmission company (Transpower) and
four separate generation companies: Contact Energy, Genesis Energy, Meridian
2 Electricity Authority Electricity in New Zealand (2011).
3 When the Coleridge Power Station was commissioned in the South Island and in 1919 in the North Island with the purchase of the Horahora Power Station from the Waihi Gold Mining Company.
Energy and Mighty River Power (now Mercury Energy). As part of the reform, local authorities were required to choose to be either electricity retailers or distributors.
[9] Currently, electricity is generated at over 200 power stations around the country and the national grid is used to transmit this electricity to large industrial users that connect directly to the grid4 and to distribution networks, to which smaller businesses and households connect.5 The transmission network is owned by Transpower and consists of high voltage pylons and lines. Distribution networks
consist of lower voltage lines, which distribute electricity to business and domestic consumers. Those generators that connect to a distribution network, instead of to the national transmission grid are “local generators” and are called “distributed generation”.
The parties
[10] Trustpower (formerly a Tauranga based local authority) is both a generator and a seller of electricity from 38 hydro power stations across 19 hydro electric power schemes, two wind farms and one diesel peaking station in New Zealand. Trustpower’s power stations are connected either to the national electricity grid or some local electricity distribution networks (distributed generation).
[11] Trustpower is a distributed generator, for those of its power stations which are connected to local electricity distribution networks. Trustpower is the fifth largest generator-retailer and the largest owner of distributed generation.
[12] The Authority is the successor to the former Electricity Commission and is an independent Crown entity.6 It has a broad range of functions, including the making and administering of the Electricity Industry Participation Code 2010 (the Code).7
[13] Meridian is one of four separate generation companies in New Zealand, having devolved from the restructure of the New Zealand Electricity Department in
the late 1980s and 1990s.
4 “Direct consumers”, as shown in the diagram above.
5 These are referred to as “load”.
6 Section 12 of the Act.
7 Sections 16 of the Act.
The regulatory framework
[14] The Act regulates the electricity industry and establishes the Authority.8
Section 15 of the Act defines the Authority’s objective, which is:9
… to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers.
[15] The Act provides a framework for the regulation of the electricity industry and, under pt 4 of the Act, industry participants must register and comply with the Code. Section 44(1) of the Act contemplates that the Code may require that connection of industry participants to the national grid will involve “transmission agreements” between Transpower and connected participants. Each transmission agreement is deemed to include a provision whereby the participant agrees to pay to Transpower charges made in accordance with the Transmission Pricing Methodology
(TPM).10 Section 41 requires the Authority to publish a consultation charter, which
for present purposes contains general consultation principles. Part 4 of the Commerce Act involves the Commerce Commission approving the TPM for Transpower’s charges.
The Code
[16] The Authority is responsible for the Code, which sets out the duties and responsibilities of industry participants (including Trustpower). Section 32 of the Act prescribes the content of the Code which is to promote any or all of the following:
(a) competition in the electricity industry:
(b) the reliable supply of electricity to consumers: (c) the efficient operation of the electricity industry: (d) the performance by the Authority of its functions:
(e) any other matter specifically referred to in this Act as a matter for
inclusion in the Code.
8 Section 12 of the Act.
9 Section 15 of the Act.
10 Section 44(4) of the Act.
[17] Among other things, the Code contains:
(a) the TPM, which sets out how Trustpower’s revenue is allocated between designated transmission customers. It includes connection charges,11 the high voltage direct current (HVDC) charge12 for the link between North and South Islands and the interconnection charge;13 and
(b)the Distributed Generation Pricing Principles (DGPP), which determine the default prices of services between a distributor and a distributed generator. The DGPP includes connection costs and the avoided cost of transmission (ACOT) payments.
[18] For clarification, distributed generation owners pay no more than the incremental cost of being connected to the network,14 which means distributed generators are not required to meet the common costs of the distribution services, including overheads.15 This is referred to as the incremental cost of connection services issue. Each distributor within the electricity industry is to pay distributed generation owners connected to its network, amounts equal to the transmission costs that the distributor avoids, as a result of the distributed generator being connected to its network.16 These payments are called the ACOT payments. Thus, in practice a distributor pays amounts equal to the transmission charges they would avoid by having the distributed generation connected, rather than the actual avoided economic costs of transmission.17
[19] The Authority has the power to amend the Code. Section 39 of the Act provides that the Authority must publicise a draft of the proposed amendment,
11 The connection charge recovers the costs of assets connecting transmission customers to the transmission grid. Connection charges are paid by customers who use those assets. See CB 2/0318.
12 This recovers the costs of the high voltage direct current (HVDC) link between the North Island and the South Island, known as the Cook Strait cable. HVDC charges are paid by South Island generators. See CB 2/0318.
13 This recovers the remainder of Transpower’s revenue relating to the regulated parts of the grid.
This charge is paid by distributors and direct customers. The interconnection charge is based on
a customer’s contribution to demand at peak times. See CB 2/0138.
14 Clause 2(a) of Schedule 6.4 to the Code.
15 CB 2/0211.
16 Clause 2(e) of Schedule 6.4 to the Code.
17 CB 5/1898 and 2/0240.
prepare and publicise a regulatory statement, and consult on the proposed amendment and the regulatory statement. Section 41 requires the Authority to establish a Consultation Charter that sets guidelines for amending the Code.
The Charter
[20] Pursuant to s 41, the Authority was required to develop, issue and make publicly available a Consultation Charter that sets out guidelines for amending the Code.
[21] The Authority issued the Consultation Charter, entitled “Processes for Amending the Code” (the Charter), which was amended on 19 December 2012. In pt 2, para 2.1 of the Charter, the Authority set out its understanding of the general consultation principles, with specific reference to Wellington International Airport Limited v Air New Zealand (“WIAL”), the leading New Zealand authority on
consultation.18
[22] The Authority sets out its s 39 obligations when amending the Code, including that it must consult on the proposed amendment and the regulatory statement.19
[23] Of relevance, at para 2.6 of the Charter, the Authority states:
The Authority will usually allocate six weeks for consultation. However, this may vary, depending on, for instance, the complexity of the issues being consulted on or the number of concurrent consultations with interested parties.
[24] Before amending the TPM, the Authority must consider there to have been “a material change in circumstances”.20 Secondly, the Authority must follow a separate set of sequential steps requiring consultation at multiple points. Those steps were set out diagrammatically in the TPM consultation paper, with the Authority stating it will comply with its obligations under the Act, the Commerce Act 1986, and the
Code. The diagrammatic process is annexed as Appendix 1 to this judgment.
18 Wellington International Airport Ltd v Air New Zealand [1993] 1 NZLR 671 (CA). The principles are discussed at 676.
19 Part 2, [2.2].
20 Clause 12.86 of the Code.
[25] Those steps required the Authority to:
(a) Prepare and publish an issues paper on the process for development and approval of the TPM and the guidelines to be followed by Transpower in preparing a methodology for allocating Transpower’s revenues to designated transmission consumers;21
(b)Consult on the issues paper with registered participants (which includes Trustpower and Meridian), allowing at least 15 business days from the date of publication of the issues paper;22
(c) Consider the submissions received by registered participants, within
20 business days or longer as the Authority may allow;23
(d)Publish the process for the development of the TPM process and any guidelines that Transpower must follow in developing the TPM;24
(e) Issue a written request that Transpower submits a proposed TPM to the Authority.25
[26] The process then involves Transpower submitting a proposed TPM to the Authority.26 If the Authority accepts the proposed TPM as conforming to the requirements in clause 12.89 of the Code,27 the Authority will release the proposed TPM for consultation.28
[27] Clause 12.92(3) of the Code stipulates that each submission on a proposed TPM must be made in writing to the Authority and has to be received on or before the submission expiry date. In addition to receiving written submissions, the Code provides that the Authority may elect to hear one or more oral submissions.
[28] Within 40 business days of the submission expiry date, or such longer period as the Authority may allow, the Authority must complete its consideration of all
21 Clause 12.81 of the Code.
22 Clause 12.82 of the Code.
23 Clause 12.82(3) of the Code.
24 Clause 12.83 of the Code.
25 Clause 12.88 of the Code.
26 Clause 12.88 of the Code.
27 Clause 12.91 of the Code.
28 Clause 12.92 of the Code.
submissions it receives on a proposed TPM and consider whether to incorporate it into the Code and the date on which it will take effect.29
[29] For completeness, s 64 of the Act provides a right of appeal to the High Court on a question of law only against any decision of the Authority. Unlike appeals by way of rehearing such as appeals under s 52Z of the Commerce Act 1986 against input methodology determinations, it is a restricted appeal right.
The TPM process to date
[30] In early 2009, the former Electricity Commission identified the TPM as an area of review based on industry participant requests, with the emphasis on security of supply and increasing transmission investment. The Authority continued the process commenced by the Electricity Commission and the following consultation has occurred:
(a) Two rounds of consultation on papers issued in 2009 and 2010;
(b)The establishment of an advisory group in 2011, which issued a consultation paper and a report;
(c) Consulting in 2012 on decision-making and the economic framework for the TPM review;
(d) Consulting on the TPM issues paper in 2012; (e) A conference in 2013;
(f) Further workshops, forums and briefings; and
(g) Ad hoc meetings with interested parties to discuss TPM and
DGPP/ACOT issues.
[31] Under s 42(b), the Authority was required to deliver a report to the Minister within 12 months, about the way in which the Authority has addressed the new matters in the Code. Section 42(3) stipulates:
A report provided under subsection 1(b) must
(a) identify which new matters are not included in the Code; and
29 Clause 12.93 of the Code.
(b) explain why the Authority has not amended the Code to include those matters; and
(c) suggest alternative methods by which the matters are or may be provided for; and
(d) set out if, when, and how the Authority proposes to provide for the matters.
[32] The above provisions came into force on 1 November 2010.
[33] As a result of the TPM consultation and arising out of it, the Authority undertook the DGPP review. This occurred by way of an October 2012 issues paper and a conference convened in May 2013. The Authority received submissions, which raised the issue of proposed amendments to the TPM, that would impact on the DGPP and the level of ACOT payments.
[34] On 19 November 2013, the Authority released its document, Transmission Pricing Methodology: Avoided Cost of Transmission payments for distributed generation working paper (the ACOT Paper). The Authority identified a number of issues with the DGPP regime and proposed a review of Schedule 6.4 of the Code, to ensure that ACOT payments compensate distributed generators for the benefits distributed generators provide, through avoided economic costs, rather than avoided transmission charges to Transpower.
[35] Following the industry reforms and restructuring of the New Zealand electricity industry, new rules and systems for the competitive parts of the sector and new pricing, investment and service standards were introduced, with a significant portion of the new arrangements being embodied in the Code.
[36] The Commerce Commission under pt 4 of the Commerce Act oversees and administers the input methodologies by monopoly services. Transpower builds and operates transmission lines and associated infrastructure to transport electricity across New Zealand and connect electricity generators, electricity distributors and large industrial consumers to its national transmission network, commonly called the national grid. Because the provision of these services is a natural monopoly service, the Commerce Commission approves the total amount that Transpower can charge annually by an individual price quality power set under pt 4 of the Commerce Act.
[37] Under the Code, Transpower must submit a proposed TPM and must develop its TPM consistently with any determination made by the Commerce Commission,30 the Authority’s objective in s 15 of the Act and any guidelines published by the Authority.31
[38] Before releasing the May consultation papers, the Authority consulted with the Commerce Commission in respect of the Commerce Commission’s Input Methodologies Review Consultation. As a result, the Authority extended its consultation period from eight weeks to 10 weeks, as the Authority acknowledged this was a busy period for electricity sector stakeholders.
The Authority’s strategy announcement
[39] On 2 March 2016, the Chairman of the Electricity Authority, Mr Layton, delivered an address to the “downstream conference”, canvassing the Authority’s scoping project and its future strategy. One of the specific issues that the Authority was reviewing was whether the Code unnecessarily constricts consumers by-passing retailers and buying directly from the wholesale market or distributed generators and whether and how it should be changed to avoid this. In promoting the role of the Authority to promote overall efficiency of the electricity industry for the long term benefit of consumers, the Chair referred to the inefficient payments, which were not in the long term interests of consumers.
[40] Mr Layton said as follows:
If the Authority were to retain payments that are obviously inefficient on the grounds, removing them would create uncertainty for those that invested to exploit the inefficiency, this would encourage and reward rent seeking behaviour. It would also penalise those that had correctly realised the payments would not survive an efficiency review a regulator must inevitably conduct, given statutory objectives. It would also discourage others from acting efficiently in future. This outcome would not be in the long-term interests of consumers.
[41] Mr Layton reinforced that the initial focus of the Authority’s strategy when it
was established in November 2010, was to deal with the matters set out in s 42 of the
30 Clauses 12.88 and 12.89 of the Code.
31 Under cl 12.8.3(b).
Act, a number of those matters being aimed at promoting competition and reliability. Having dealt with the s 42 matters, the Authority’s strategy focus now was on promoting workable competition in the electricity industry. Acknowledging that promoting reliability in competition remains important to the Authority, Mr Layton stated that, more recently, the Authority’s strategic focus has turned towards the efficiency limb of its statutory objective. He described the Authority’s aim as being twofold:
(a) To ensure there are no inefficient barriers to the adoption of new technologies, whether by existing market participants or new entrants; and
(b)To ensure, as far as practicable, that decision-makers of our new technologies face efficient prices for inputs and outputs.
The Consultation Papers
[42] On 17 May 2016, the Authority released the TPM paper and the DGPP paper for consultation. The Authority allowed a 10 week consultation period, requiring submissions from interested parties by 26 July 2016. The release of the papers was foreshadowed by a specific announcement on 12 April 2016 of their intended release.
The TPM Paper
[43] The TPM paper describes the consultation process and draws attention to the fact that the process is at the stage described at cl 12.81 of the Code, being an issues paper on the process for development and approval of the TPM and the guidelines to be followed by Transpower in developing the methodology. The paper proposes retaining the current connection charge and replacing the HVDC and interconnection charges with the following two principle charges, among other things:
(a) Area of benefit charge: this charge would allow Transpower to recover the cost of eligible investment in the grid from parties that receive positive net benefits expected over the life of the investment; and
(b)Residual charge: this charge would be payable by load customers (i.e. distribution customers and directly connected customers) to recover costs that are not covered by the other charges. The charge would be based on the physical capacity of the particular load customer.
The DGPP Paper
[44] This paper proposes the removal of DGPP from the Code, to enable the prices between distributors and distributed generators to be determined according to a set of pricing principles, which will guide distributors in setting prices for distribution services generally. In this way, the ACOT and incremental or connection cost issues are addressed. If the DGPPs are removed, Transpower would then have to negotiate agreements on whether to make payments to distributed generation owners for reducing transmission costs. The respondents’ position is that the existing system cannot be justified in terms of efficiency, and removing the DGPP will result in flow- on benefits to consumers.
Trustpower’s requests
[45] Between 3 June and 25 July 2016, Trustpower wrote to the Authority three times to request extensions to the time for submissions. The basis of its requests can be summarised as follows:
(a) the TPM proposals had significantly changed from previous proposals;
(b) the DGPP proposal was the first and final proposal;
(c) the proposals were developed without the benefit of advisory groups; (d) time was needed to digest the Authority’s cost-benefit analysis;
(e) there was a lack of guidance as to how previous submissions had been incorporated; and
(f) there was a need to undertake a further cost-benefit analysis relating to the proposals, which required more time.
[46] Those requests were denied. The Authority’s reply included the following responses:
(a) the ten week period was to account for factors raised by Trustpower, and was longer than the usual six week period;
(b)a consultation period of ten weeks was enough time for high quality submissions;
(c) the Authority had not finally determined the DGPP paper and was open to the possibility of further consultation;
(d) some of the issues had been raised before in the ACOT paper; (e) the proposal in the DGPP paper is relatively simple;
(f) the consultation could not fairly be described as rushed;
(g)the TPM project was a high priority and the Authority wanted to avoid delays;
(h) Trustpower’s view that further work was needed would be taken into
account as a submission and considered further; and
(i)the Authority would undertake further work and consultation if necessary.
[47] The Authority says that it received a total of 508 submissions in respect of the TPM paper and 54 submissions in respect of the DGPP paper. Of the 508 submitters on the TPM paper, there were four parties (including Trustpower) who requested extensions of time. Of the 54 submitters on the DGPP paper, two parties (including Trustpower) requested an extension of time. Trustpower submits in reply that one of the submitters requesting an extension was the Auckland Electricity Consumer Trust, which was acting on its own behalf and 400 other submitters. Thus, a significant majority sought an extension of time.
Further Consultation Opportunity
[48] Following the hearing on 14 – 15 September 2016, the Authority advised the Court and the parties that it intends to issue a supplementary TPM consultation paper, on or about 6 December 2016, with its response to submissions received on
the TPM paper, and that it has decided to consult on refinements to the proposal for the new TPM Guidelines. Submissions on the supplementary TPM consultation paper will be due on 10 February 2017. The Authority is still considering submissions on the DGPP paper and the implementation date for the DGPP proposal will not now occur until April 2018 at the earliest.32
PART II: THE PARTIES’ POSITIONS
Trustpower’s position
[49] Trustpower submits that the May consultation papers were substantially new and unexpected and have not been substantively addressed previously. It submits that the 10 weeks consultation period was insufficient, given that the proposed changes had not been previously addressed. The new proposals require detailed work, which cannot be completed in 10 weeks.
[50] Trustpower acknowledges that in judicial review terms, its application is exceptional, because the focus of its application is confined to the Authority’s process decisions only, namely on the flaws and potential miscarriage of the consultation process itself. Its application is not seeking to “judicialise” the Authority’s processes, but to enhance the scope for good decision making. The enhancement referred to includes recognition and mitigation of the risks of
“consultation fatigue”33 and “confirmation bias”34 on the part of the Authority.
[51] In the absence of substantive appeal rights, Trustpower submits that the Authority should get the process right now, by giving parties an opportunity to present their further submissions with a detailed cost benefit analysis, the provision of expert evidence analysing the consequences of the Authority’s process, the ability to make cross-submissions and an oral hearing, where all parties can have an
adequate chance to make meaningful submissions.
32 Market Brief : 18 Oct 2016, “Supplementary consultation to the TPM second issues paper” and
“Distributed generation pricing principles (DGPP) date change”.
33 Consultation fatigue is described at [64].
34 Confirmation bias is described at [60] - [61][64].
Grounds of review
[52] The statement of claim alleges that the Authority, in rejecting Trustpower’s
“process requests”, made a decision which:
(a) failed to have full awareness of the existence or relevance of and full regard to, the contextual relevancies; and/or
(b) involved an irrational weighing of the contextual relevancies against
the other matters mentioned in the Authority’s Letters; and/or
(c) misunderstood and/or exceeded the Authority’s powers under the Act;
and thus were unlawful and invalid. [53] The contextual relevancies pleaded are:
(a) the volume and complexity of the matters addressed in the DGPP and
TPM papers;
(b)the substantial changes and/or novelty of many of the proposals outlined in the DGPP and TPM papers;
(c) the absence from these Papers, and elsewhere, of clear outlines of the Authority’s responses to the substantial volume of submissions made prior to 2016 on the Authority’s earlier papers relating to DGPP and TPM;
(d)the desirability of the Authority receiving and understanding fully the submissions, including fully developed reports and other evidence by relevant experts, from major industry participants (including Trustpower);
(e) the long term industry significance, and direct financial implications, of the proposals in the May consultation papers, given the large current and future investments in industry assets;
(f) the substantial time and resources required to understand the proposals in each of the TPM and DGPP Papers, to ascertain the short-term and longer-term implications (operational, investment and financial) of such proposals for the industry and particular participants, to brief a range of industry experts (internal and/or
external), to draft considered and coherent submissions, and to coordinate all of these matters in relation to both papers before the 26
July deadline;
(g)that some research projects which would inform submissions on the May consultation papers could not be commissioned, undertaken, completed, analysed and incorporated in such submissions before the
26 July deadline;
(h)the very lengthy gestation periods between the DGPP and TPM Papers and the Authority’s previous papers relevant to the DGPPs and the TPM;
(i)the absence of any external or otherwise pressing urgency in receiving and considering submissions on the May consultation papers;
(j)the risk of the Authority’s consultation obligations being undertaken as, or being perceived to be, a mere formality or charade;
(k)the necessity of active and transparent intellectual engagement by both the Authority and submitters to ensure that consultation is meaningful;
(l) prior public expressions about the consultation process by the
Authority;
(m)the valuable refinement of the issues raised by voluminous and more or less competing submissions that is available through the process of cross submissions and a meaningful (albeit non-judicialised) oral hearing;
(n)the fundamental purpose of consultation requirements, including the pursuit of the highest practicable quality of sound decision-making by public bodies; and
(o) the absence of any right of appeal against decisions of the Authority.
[54] The basis for Trustpower’s claim is the long term industry significance and direct financial implications of the proposals in the May consultation papers, given the large current and future investments in industry assets. These contextual
relevancies were supported by affidavit evidence from industry participants, experts
and Trustpower’s own Chief Executive.
[55] By way of relief, Trustpower seeks the Court’s intervention to:
(a) order the Authority to undertake consultation fairly, by providing submitters an opportunity to commission research to make informed submissions;
(b) declare the rejection of Trustpower’s request for further time
unlawful; and
(c) require the Authority to give a further 60 days for submissions; order the Authority to convene a hearing; or direct the Authority to reconsider Trustpower’s requests.
[56] Mr Farmer QC for Trustpower submits that the process, given the context, has “seriously gone off the rails”, justifying and requiring the court’s intervention. There were two areas in particular, which are of concern to Trustpower in relation to any further effective consultation. They are:
(a) The draft guidelines promulgated for Transpower to develop the transmission pricing methodology under cl 12.83 of the Code fetters Transpower’s ability to undertake its task, because the guidelines are too restrictive. No further consultation is permitted under the Code, once Transpower has submitted its methodology to the Authority under cl 12.88. Trustpower submits that further consultation is required in respect of the Authority’s proposed guidelines for the
development of TPM.35
(b)Although Trustpower has made submissions within the permitted 10 weeks of the consultation period, the value of those submissions is inadequate, to deal with the change in the complexity of the new
proposals contained in the consultation papers. Without an ability to
35 Clause 12.83 of the Code.
properly address the cost benefit analysis involved in those new proposals, Trustpower has provided less than ideal submissions, and a full cross-submission and oral hearing process should be adopted by the Authority, to enable the issues to be properly explored. Trustpower says that this makes the consultation undertaken by the Authority meaningless.
The process has “gone off the rails”
[57] Trustpower submits that procedural unfairness is not to be tested by the Wednesbury unreasonableness standard,36 but by whether something has gone seriously wrong. It relies on R v Panel on Takeovers and Mergers, ex parte Guinness Plc (“Guinness”),37 where the refusal by the Takeovers Panel to adjourn a hearing was judicially reviewed. Lord Donaldson MR framed the test for procedural unfairness, not by the Wednesbury unreasonableness threshold, but by the question “whether something has gone wrong in its nature and degree which requires the intervention of the Court.” Lloyd LJ, in the same decision, said:
Of course the Court will give great weight to the Tribunal’s own view of what is fair, and will not likely decide that a Tribunal has adopted a procedure which is unfair, especially so distinguished and experienced a Tribunal as the Panel. But in the last resort the Court is the arbiter of what is fair. I would therefore agree with Mr Oliver that the decision to hold the hearing on 2 September is not to be tested by whether it was one which no reasonable Tribunal could have reached.
[58] Reliance was also placed on Marlborough Aquaculture Ltd v Chief Executive, Ministry of Fisheries where Ronald Young J acknowledged that there may be situations where, because the procedure of decision-making has seriously gone off the rails at an early stage in the process, it is essential that the Court quash the decision.38 He noted that this will particularly be the case, where no form of further
consultation with the aggrieved party can cure the defect.39 Mr Farmer QC urged the
Court to intervene here, because this review application concerned an unfair procedure and one that has gone off the rails. The intervention was required, before
it was too late.
36 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (CA).
37 R v Panel on Takeovers and Mergers, ex parte Guinness Plc [1990] 1 QB 146 (CA), 178 – 179.
38 Marlborough Aquaculture Ltd v Chief Executive, Ministry of Fisheries [2003] NZAR 362 (HC).
39 At [15].
[59] Trustpower accepts that the court will only intervene where the procedure has “seriously gone off the rails”. It submits that this is a case where it is appropriate for the court to intervene and it is not premature, because it concerns a process that has been completed, and there is no further planned consultation in which the participants can engage.
Consultation was inadequate
[60] Further, Trustpower submits that the process thus far has been inadequate. It notes that “best practice” is for robust and infrequent regulatory changes. Consultation plays an important role in challenging monopoly decision-makers. Trustpower adduced research evidence demonstrating that decision-makers can show a “confirmation bias”, where they tend to seek confirmation of an existing view. The Authority therefore may not be the best placed to determine whether it has sufficient evidence for its decision. In this context, Trustpower says, it is important that cross- submissions be accepted. Trustpower submits that the issues are highly complex, so the fact that there has been previous consultation does not permit curtailment of consultation for the revised proposals.
[61] In referring to “consultation fatigue” and “confirmation bias”, Trustpower relied on psychological research to show that decision-makers and experts such as those engaged in regulatory decision-making, are subject to heuristic biases, which provide cognitive shortcuts, based on experiences that arise from every day decision- making, that reduce the effort that one must put into decisions and yet still yield sufficient accuracy for such decisions.40
[62] “Confirmation bias” results from decision-makers having a tendency to confirm an initial hypothesis in the face of later acquired disconfirming evidence, even though the hypothesis may not have been based on substantial or reliable evidence. In other words, the bias manifests itself in the decision-maker being prone to confirm what was originally thought, without paying heed to submissions
suggesting the opposite.
40 Mark Seidenfeld Cognitive Loafing, social conformity and judicial review of agency rule making
(2002) 87 Cornell L Rev 486.
[63] “Consultation fatigue” involves a risk that both the regulator and the regulated parties start to suffer from fatigue in the consultation process and there is an understandable desire to bring discussion and consideration to an end, to enable the final decision to be reached.
[64] Trustpower submits that the risks of confirmation bias can be alleviated, if the decision-maker takes seriously the obligation to open-mindedly consider and engage with alternatives to the hypothesis proposed, by allowing further procedural steps, to minimise the risks of both “confirmation bias” and “consultation fatigue”.
[65] Trustpower submits that it has not been given an opportunity to be heard and that is a breach of procedural fairness and natural justice, at this stage of the consultation process. It urges the Court to intervene, to ensure further procedural steps can be undertaken, before the Authority reaches its decision.
[66] Although the grounds of review also alleged errors of law, failure to consider relevant considerations and unreasonableness, the principle ground advanced was procedural unfairness. Trustpower submitted that the obligations of fairness required the Authority to have full awareness of, and regard to, and to rationally weigh each of the contextual relevancies in determining Trustpower’s process requests. At the hearing, the areas of review merged into a consideration of procedural unfairness and whether the process had “seriously gone off the rails”. The parties focussed their submissions on that basis and this decision focuses on the merged review ground, as argued.
The Authority’s position
[67] The Authority’s position is that this proceeding should be dismissed on the
following grounds:
(a) The Authority’s responses declining Trustpower’s “process requests” were procedural in nature and not amenable to judicial review, prior to the conclusion of the consultation process and the making of the Authority’s decision.
(b)Nothing in the process has “seriously gone off the rails” justifying the Court’s intervention at an interlocutory stage. It is not in the interests of good public administration to interfere in the current decision- making process. The substantive decision can be challenged, if the outcome of the process requests have impacted on the Authority’s decision.
(c) Opinion evidence filed for the applicant is on the ultimate issues in the proceeding and the decision-maker has not yet concluded the consultation processes, let alone made its final decision. Little or no weight should be given to the evidence filed by the applicant and it is inappropriate for the Authority to respond to it.
(d)There is no basis for the Court to hold that the Authority has breached any administrative law or legal obligations. Its responses fall within the range of a reasonable decision-maker in the position of the Authority.
(e) The applicant’s concerns and the reasons for the requested extensions of time are matters of submission, which will be assessed on their merits by the decision-making board members in their expert judgment.
[68] Mr Galbraith QC for the Authority submits that in the absence of the Authority reaching a decision on either consultation or the guidelines, it is inappropriate for a merits-based approach to be taken in this proceeding, which is being urged by the Applicant. The Authority is still undertaking its consideration of the submissions and has not reached a decision on the merits of those submissions. The Authority’s decision ultimately can be subject to a judicial review challenge, but this proceeding should not be a merit-based challenge. Depending on the outcome, the Authority is able to take advice, either to start the process over again or have another consultation.
[69] The Authority accepts that consultation must be meaningful and that sufficient time for consultation must be allowed. However, all parties agree that consultation is not the same as negotiation.
[70] The Authority submits that, for its procedural decision to be found “unfair”, it may be appropriate to adopt a Wednesbury approach. That is, it would be appropriate to ask whether the decision was so absurd that no sensible person would ever reach that view. The Authority submits that it is a decision-maker with special expertise and that the courts are often wary of intruding into areas that involve assessing the merits, particularly in a specialised field.
[71] Further, the Authority submits that there has not been an error of law. First, the Authority did not err in its interpretation of the Act and it properly directed itself as to the purpose of the Act. Secondly, it has considered everything it was obliged to consider, namely the mandatory relevant considerations, as well as all matters raised by Trustpower in its requests. Questions of weight are for the decision-maker.
[72] The Authority criticised Trustpower’s submissions for engaging with the substantive decision that has not yet been made, and contends that Trustpower’s process requests contain material that is better characterised as a submission on the final issue. The Authority considers it is inappropriate for it to respond to the substantive arguments made, while its decision on the Code review is still underway.
[73] On the issue of justiciability of the Authority’s process decision, both the Authority and Meridian take the same approach. This is explored below under “Reviewability of a procedural decision”.
Meridian’s position
[74] Meridian makes three principle submissions:
(a) The application to review the Authority’s process decision is
premature.
(b)Trustpower has not established that additional consultation time was required or additional process steps are necessary.
(c) Delaying the Authority’s process delays the introduction of important reforms to the electricity industry, with a real cost to consumers and individual participants, such as Meridian.
[75] For Meridian, Mr Every-Palmer made submissions on Trustpower’s substantive arguments and engaged in a comparative analysis of the evidence filed by Trustpower, the Authority and Meridian. Generally, Meridian contends that many of the alleged gaps in the evidence before the Authority are matters where Trustpower disagrees with the Authority’s approach. Meridian also notes that there is an inconsistency in Trustpower arguing, on the one hand, that there are new proposals in the May papers and, on the other hand, criticising the Authority for having a confirmation bias.
[76] In response to the complaint from Trustpower that the TPM Paper involved “major differences” to previous proposals, Meridian submits that the matters have been raised in previous consultations. Those May 2016 proposals flesh out details of earlier proposals. They reflect normal regulatory evolution and, compared with other processes run by the Authority, the time given for consultation was generous.
[77] Meridian also submits that increasing the time for consultation would cause significant further delays for implementing new proposals. Meridian points out that Trustpower is likely to lose $25 million each year (or gain $25 million in continued ACOT payments), if the new proposals are implemented, and therefore it is in its interest to delay the process. Equally, Meridian stands to gain $57 million by the Authority’s proposals and delay is inimical to its potential future fiscal position. Meridian says social costs and consumer’s funding of ACOT payments will result from delay.
Reviewability of a procedural decision
[78] Both the Authority and Meridian submit that the Authority’s decision is not properly reviewable. Notwithstanding the fact that judicial review is concerned with the process of a decision, it is usually the final decision that is the subject of review rather than preliminary or procedural decisions. Judicial review will not always be
appropriate for interim decisions.41
41 Singh v Chief Executive of the Ministry of Business, Innovation and Employment [2014] NZCA
220, [2014] 3 NZLR 23 at [39].
[79] In Philips & Pike Ltd v Commerce Commission, Davison CJ declined to review a procedural decision on the basis that there was no jurisdiction or alternatively that the court should decline to exercise its jurisdiction.42
[80] The Authority also relied on Wellington International Airport Ltd v Commerce Commission, in which Wild J declined to review the Commission’s decision to refuse further submissions in the consultation process on the landing fees issue,43 doubting that the challenged decision was an exercise of statutory power but was instead a step in the Commission’s deliberations and was premature.
[81] In response to the submission that Transpower’s discretion has been fettered by constraining draft guidelines, Meridian submits that the consultation process is not complete, and that the Authority signalled that to be the case in its response to Trustpower’s third extension request. The Authority indicated its view that it would be appropriate for Transpower to adopt a consultation process in its development of the TPM. This is not a case where further consultation could not cure any defect. The Authority submits that the process of consultation is not complete because it includes considering submissions, including Trustpower’s request for further analysis to be undertaken, cross-submissions and a conference to be held.
PART III: ANALYSIS
[82] There is a large measure of agreement on the relevant facts and applicable law. The following is a distillation of the matters, on which the parties either agree or accept as a fact. They are:
(a) This judicial review is a process challenge at a preliminary stage of a consultation process.
(b) The Authority is still considering the participants’ submissions,
including Trustpower’s requests for further time to permit more submissions, cross-submissions and a conference to be held.
42 Philips & Pike Ltd v Commerce Commission HC Wellington A444/79, 14 December 1979.
43 Wellington International Airport Ltd v Commerce Commission (2002) 10 TCLR 460 (HC).
(c) Court intervention before a final decision is only warranted when the procedure of decision-making has seriously gone off the rails at an early stage in the process.44
(d) The Authority’s ultimate decision is amenable to a judicial review
challenge, by any of the affected industry participants.
(e) Subsequent to the hearing, a further consultation opportunity is available to the parties to make submissions on the Authority’s supplementary TPM consultation paper and the implementation of the DGPP proposal will not occur until April 2018.
[83] What is not agreed is whether the May consultation proposals are new, whether more time for consultation is warranted, whether the Authority’s consultation process to date is meaningful or adequate and whether the decision- making process has seriously gone off the rails, such that Court intervention is warranted.
[84] The key issue for determination of this proceeding is whether the decision- making process has seriously gone off the rails.
[85] There are three aspects to consider in this determination: (i) The Authority’s duty of consultation.
(ii) Court intervention at a preliminary st.age
(iii) Has the process seriously gone off the rails here?
The Authority’s duty of consultation
[86] Section 39 of the Act imposes on the Authority a statutory obligation to consult on proposed amendments to the Code. In addition, the Authority has a regulatory obligation to comply with its Consultation Charter, that sets out the
guidelines for amending the Code. The sequential steps requiring consultation at
44 Marlborough Aquaculture Limited v Chief Executive, Ministry of Fisheries, above n 38, at [15].
multiple points through the TPM amendment process are set out at Appendix 1 to this judgment as previously noted.45
[87] By reference to that diagram, the Authority has completed step one, by publishing and consulting on an issues paper on the TPM process and guidelines and is still undertaking step two, namely its consideration of all submissions. As part of its consideration, the Authority submits before this Court that it is considering all of the submissions, including the process requests by Trustpower to allow further time for submissions, cross-submissions and a conference and/or hearing.
[88] The Charter specifically refers to the principles of consultation in the Court of Appeal’s decision of WIAL.46 The Authority interpreted those to include: allowing sufficient time for consultation “and genuine effort must be made”; listening to what others have to say, considering their responses and then deciding what to do on a proposal not yet finally decided on; making available sufficient information to enable parties to be adequately informed to make “intelligent and useful” responses;
and approaching the matter with an open mind, being prepared to change or even starting a process afresh.47
[89] Those WIAL principles were affirmed by Asher J in Diagnostic Medlab Ltd v
Auckland District Health Board, as being:48
(a) Consultation includes listening to what others have to say and considering the responses.
(b) The consultative process must be genuine and not a sham. (c) Sufficient time for consultation must be allowed.
(d)The party obliged to consult must provide enough information to enable the person consulted to be adequately informed so as to be able
to make intelligent and useful responses.
45 At [16].
46 Wellington International Airport Ltd v Air New Zealand, above n 18.
47 Part 2 [2.1].
48 Diagnostic Medlab Ltd v Auckland District Health Board HC Auckland CIV-2006-404-4724, 20
March 2007, judgment reported in [2007] 2 NZLR 832 with [258] redacted. These principles were also affirmed in New Zealand Pork Industry Board v Director-General of the Ministry for Primary Industries [2013] NZSC 154, [2014] 1 NZLR 477 at [168].
(e) The party obliged to consult must keep an open mind and be ready to change and even start afresh, although it is entitled to have a work plan already in mind.
[90] The Charter includes the WIAL statement that consultation is not to be equated with negotiation or agreement, adding that “although in consultation the tendency is, at least, to seek consensus”. WIAL cautions that it involves more than mere notification.49
[91] These principles are mirrored in the 2014 English Supreme Court’s decision in R (Moseley) v London Borough of Haringey (“Haringey”), which confirmed “the Sedley criteria” for a fair consultation process.50 Those four requirements are:51
(a) That consultation must be at a time when proposals are still at a formative stage.
(b)That the proposer must give sufficient reasons for any proposal to permit of intelligent consideration and response.
(c) That adequate time must be given for consideration and response.
(d)That the product of consultation must be conscientiously taken into account in finalising any statutory proposals.
[92] What constitutes adequate time for effective consultation will depend on the context. In Wellington International Airport Ltd, it was recognised that in some situations adequate consultation can occur in one phone call, whereas in other settings it could require years of formal meetings.52 The touchtone in all cases is
reasonableness.53
[93] Where the decision-maker changes its stance part way through the consultation process or where additional materials become available, it is necessary
49 Wellington International Airport Ltd v Air New Zealand, above n 18, at 674, 676.
50 R (Moseley) v Haringey London Borough Council [2014] UKSC 56, [2014] 1WLR 3947 at [25].
51 R v Brent London Borough Counsel ex parte Gunning (1985) 84 LGR 168 (QB) at 189. The criteria were also accepted in Royal Brompton, as a “prescription for fairness”.
52 Wellington International Airport Ltd v Air New Zealand, above n 18, at 675.
53 See McInnes v Minister of Transport [2001] 3 NZLR 11 (CA) at [34]; Air New Zealand Ltd v Nelson Airport Ltd HC Nelson CIV-2007-442-584, 27 November 2008 at [48]; Hoechst Marion Roussel (NZ) Ltd v Pharmaceutical Management Agency Ltd HC Wellington CP13/98, 25 June
1998 at 10.
to update the consulting parties. In Contact Energy Ltd v Electricity Commission, MacKenzie J noted that further consultation on the changes is required where a change is fundamental, significantly affects consultees or was based on contested reasoning not previously signalled to consultees.54 However, where new material does not alter the proposals in any material way, it is not necessary for parties to be consulted in respect of each change.55
[94] In New Zealand Pork Industry Board v Director-General of the Ministry for Primary Industries, the Supreme Court considered the requirements of consultation under the Biosecurity Act 1993.56 The majority judgment noted that, in a context where consultation follows the promulgation of a draft standard or a risk analysis, the obligation to consult includes an obligation to inform parties of the proposal.57
Also, the majority found that there is an obligation to consult further where the scientific basis for a proposal has changed.58 After an initial consultation and review panel process, further work was recommended. The Court found that further work will not always trigger a need for further consultation and depends on the nature, extent and impact of the further work.59 The Supreme Court reaffirmed the principles in WIAL.
[95] Trustpower asserts that the consultation does not comply with the principles in WIAL, as it is not meaningful. Although the Authority says it will decide whether or not to undertake further analysis and consultation, Trustpower contends that it has not provided the Authority with the benefit of the material that would assist the Authority in its decision on the draft proposals. Trustpower relies on the judgment of Lloyd LJ in Guinness, that the question of whether a process is fair, is one “of
which the Courts are the author and sole judge”.60
54 Contact Energy Ltd v Electricity Commission HC Wellington CIV-2005-485-624, 29 August
2005 at [30]–[36].
55 Air New Zealand Ltd v Nelson Airport Ltd, above n 53 at [50].
56 New Zealand Pork Industry Board v Director-General of the Ministry for Primary Industries, above n 48.
57 At [168].
58 At [172].
59 At [173].
60 R v Panel on Takeovers and Mergers, ex parte Guinness Plc, above n 37, at 184.
[96] On the basis of the consultation principles in WIAL and the Sedley criteria, the real challenge to the consultation process conducted by the Authority to date is the sufficiency or adequacy of time given to the parties to make adequate submissions. Answering the question of whether 10 weeks is adequate or appropriate requires an intensive assessment of the factual background and history of these consultation proposals.
[97] I accept the Authority’s submission that the Court cannot engage in a merits- based approach or analysis to this procedural challenge. The Court is not in a position to assess the strengths or weaknesses of the evidence presented and cannot assess the amount of further time required to undertake a more considered cost- benefit analysis approach by Trustpower. The invitation by Trustpower to contrast the 10 weeks afforded to industry participants to respond to submissions that have taken seven years to evolve may well have validity, but the Court is not in a position to properly assess what is an adequate time to address the proposals.
[98] Meaningful consultation consists of listening to what others have to say, considering their responses and then deciding what is to be done.61 As in WIAL the process decisions challenged here go to the adequacy of Trustpower’s opportunity to participate in that process. That can only be properly assessed once the Authority has reached its decision.62 It has submitted that it is considering all submissions, both to substance and process.
[99] To the limited extent that I am currently able to assess the adequacy of the Authority’s consultation process, I note that the Authority extended the time for submissions from the industry from six weeks (as provided in the Charter) to 10 weeks after liaising with the Commerce Commission. The present indications from the Authority appear to demonstrate that it has had regard to the submissions received and is offering a further opportunity for consultation, with a timetable for reply submissions signalled well in advance of the release of its supplementary TPM
paper. The WIAL principles appear to be engaged and applied to the Authority’s
61 West Coast United Council v Prebble (1988) 12 NZTPA 399 (HC) at 405.
62 Wellington International Airport Ltd v Commerce Commission, above n 43, [48]
consultation process, but in the absence of its decision on the submissions, it is difficult to gauge the adequacy of time required to address the proposals.
Court’s intervention at a preliminary stage
[100] The second consideration is whether the Court should intervene at a preliminary stage of a consultation process, before the decision-maker has reached a decision on the submissions received and whether a process decision, such as refusing more time, is justiciable.
[101] It is a well accepted public law principle, both in the English jurisdiction and New Zealand, that the availability of judicial review before a final decision has been made is wholly exceptional. It can occur, however, where the relevant procedure can be viewed as part of the decision itself.63 In that respect, a preliminary process decision is justiciable.
[102] The English Court of Appeal has provided helpful guidance on public law consultation obligations and the intervention of the Courts at a preliminary stage in a consultation process. In R (Royal Brompton and Harefield NHS Foundation Trust) v Joint Committee of Primary Care Trusts (“Royal Brompton”) the Joint Committee of Primary Care Trusts successfully appealed an order, quashing a major consultation which it had undertaken into the reconfiguration of National Paediatric Cardiac
Surgical Services, by means of a public consultation document.64 The applicant,
Royal Brompton failed on appeal, to establish that Royal Brompton ought to have been included as one of the Centres for National Paediatric Cardiac Surgical Services. Arden LJ for the Court of Appeal addressed the requirements on public bodies undertaking consultation exercises. Apart from the statutory framework under which an Authority operates, the Court considered the general law and described the obligation of fairness, which the law imposes, on any public
consultation exercise. Arden LJ said:65
63 Board of Airline Representatives New Zealand Inc v Attorney-General HC Wellington, CP391/98, 8 December 1998; Singh v Chief Executive Ministry of Business, Innovation and Employment above n 41 [35].
64 R (Royal Brompton and Harefield NHS Foundation Trust) v Joint Committee of Primary Care
Trusts [2012] EWCA Civ 472; [2012] 126 BMLR 134.
65 At [11].
The object of requiring fairness is to ensure high standards in decision- making by public bodies, and to enable responses to be made which will best facilitate a sound decision as a result. In addition, it must achieve the statutory objective …
[103] Of relevance to this proceeding, the challenge in Royal Brompton was focused on the consultation process, not the final decision of the public body. The Court observed that one of the functions of a consultation process is to winnow out errors in the decision-maker’s provisional thinking. The decision-maker owes a public law duty to reconsider matters in the light of responses. True consultation is not a matter of simply “counting heads”. It is not a matter of how many people
object to proposals but how soundly based their objections are.66
[104] More pertinently, the Court warned of the dangers of intervention at the earlier stage of the consultation process. Not only can it cause undue delay, but such intervention may be unnecessary, if the decision-maker says no decision can yet be made. It is also relevant that in the event there has been a reviewable error, the ultimate decision is liable to be the subject of challenge:67
Moreover, the process of reconsideration is a public and transparent one. If a public body fails to consider a significant matter or to reach a reasonable result by doing so, its further decision is liable to be the subject of challenge. A well-governed public body, with the public interest at heart, will be one that is able to concede in appropriate circumstances that its provisional thinking has been proved to be wrong. Nor should the court overlook the possibility that, following receipt of consultation responses, the decision- maker may conclude that no decision is yet possible. That would mean that nothing may be gained by complex litigation at the consultation stage.
It is of course difficult to know at the earlier stage whether the decision will be persisted in after consultation. Intervention at the earlier stage may also cause wasteful, harmful or avoidable delay, particularly where consultation is conducted on the scale on which it was conducted in this case. On the other hand, there will be cases where it is appropriate to grant some form of relief in relation to a consultation process, not least because applications for judicial review must be made promptly. Nonetheless, the judge may properly conclude that, even though there has been a public law wrong, the matter is best dealt with by refusing relief and allowing the decision-maker to consider the matter following completion of the consultation and an opportunity to take the appropriate action at that stage.
66 R (Royal Brompton and Harefield NHS Foundation Trust) v Joint Committee of Primary Care
Trusts, above n 64, at [87].
67 At [88] – [89].
[105] As a further warning against early judicial intervention, the Court held that the grant of public law remedies should occur, only if there is some irretrievable flaw in the consultation process. Otherwise the Court should hesitate to step in too quickly. The Court expressed it in this way:68
In short, it is inherent in the consultation process that it is capable of being self-correcting. This has to be borne clearly in mind. For the various reasons already indicated, the courts should therefore avoid the danger of stepping in too quickly and impeding the natural evolution of the consultation process through the grant of public law remedies and perhaps being led into areas for the professional judgment of the decision-maker. It should, in general, do so only if there is some irretrievable flaw in the consultation process.
[106] In this proceeding, Trustpower does not seek to quash the consultation exercise, as in the Royal Brompton case, but seeks the Court’s intervention to declare the Authority’s rejection of Trustpower’s request for further time as unlawful and seeks an order requiring the Authority to give a further 60 days for submissions, or convene a hearing, or direct the Authority to reconsider Trustpower’s requests. It is, in effect, an invitation to the Court to direct the Authority’s timetabling and “hearing” procedures during its consultation process.
[107] In this case, the Authority’s consultation process is capable of being self- correcting, as it has demonstrated by offering further consultation on its refined TPM supplementary paper and the postponement of the DGPP proposals. The relief sought involves the Court intervening in timetabling and hearing directions, which is normally for the Authority to determine, in managing its own process. It does not justify Court intervention at this stage of the process, unless there has been some irretrievable flaw or the process has gone off the rails.
Has this decision-making process gone seriously off the rails?
[108] Trustpower submits that the Authority’s views have already been expressed by the Chairman in March 2016, when he expressed the view that the ACOT payments were “obviously inefficient” and constituted “rent seeking behaviour” by those receiving them. It is this mindset that Trustpower says should be corrected, by
requiring the Authority to give more time to receive a proper cost-benefit analysis of
68 At [92].
its proposals and to rethink the guidelines proposed for Transpower to develop a TPM. In this regard, the concern expressed by Trustpower is that the Authority has effectively fettered Transpower’s discretion.
[109] Trustpower says that because the proposals contain material that was new and complex and there has been a statement from the Chairman that portrays a mindset, the Court should intervene to prevent the consultation process confirming such bias. Trustpower urges this Court to intervene, because there is an “irretrievable flaw” in the consultation process and “the procedure of decision-making has seriously gone off the rails”.69
[110] In the Guinness decision,70 the English Court of Appeal, in dealing with the Takeover Panel’s refusal to adjourn a hearing, examined the judicial review jurisdiction of the Court on a procedural decision, such as whether or not to adjourn a hearing. Noting that this is normally a matter for the exercise of judicial discretion by the Court or Tribunal seized of the matter, Lord Donaldson MR stated that intervention by the Court granting relief on judicial review in such circumstances is wholly exceptional, particularly where there has been a right of appeal which was not exercised. He confirmed that it is more appropriate to consider whether something has gone wrong of a nature and degree, which requires the intervention of the Court, rather than approach the matter on the basis of separate heads of Wednesbury unreasonableness and unfairness or breach of the rules of natural
justice.71 Although the Court will be less reluctant to intervene where the attack is
based on a procedural irregularity and the substantive appeal has to be postponed for some reason or is limited in scope, it was open to Guinness to apply for judicial review in that case. Lloyd LJ emphasised that in the last resort, the Court is the arbiter of what is fair. In the end, the Court there did not intervene, because it was
not satisfied that there had been any real injustice or even any real risk of injustice.72
[111] The New Zealand Authorities are in accord with the English jurisprudence. In Singh v Chief Executive Ministry of Business, the Court of Appeal reinforced that
69 Marlborough Aquaculture Ltd v Chief Executive, Ministry of Fisheries, above n 38.
70 R v Panel on Takeovers and Mergers, ex parte Guinness Plc, above n 37
71 At 178.
72 At 184 and 192.
the power of review exists, notwithstanding any right of appeal possessed by an applicant. Matters need not have reached the stage where a statutory power of decision has been exercised. Having said that however, the authorities warn that it does not follow that every exercise of a statutory power will be amenable to review. The real question is whether there is a sufficient basis for the Court to invoke its
jurisdiction under s 4 of the Judicature Amendment Act 1972.73
[112] In Attorney-General v Zaoui the Court of Appeal rejected the Attorney- General’s submission that judicial review was premature and judicial review was found to be available in respect of a preliminary decision made by the Inspector- General of Intelligence and Security in declining to provide Mr Zaoui with a summary of the information relied on for a security risk certificate.74
[113] The Court of Appeal in Singh cited with approval Marlborough Aquaculture Limited v Chief Executive, Ministry of Fisheries, where Ronald Young J acknowledged:75
… there may be situations where because the procedure of decision-making has seriously gone off the rails at an early stage in the process it is essential that the Court quash the decision. This will particularly be the case where no form of further consultation with the aggrieved party can cure the defect. An obvious example of over bias by a decision-maker if established at a preliminary stage it will probably be fatal to all subsequent decision-making.
[114] Ronald Young J concluded in that case that the preliminary decision of the decision-maker was not a “proposed decision” in terms of s 4 of the Judicature Amendment Act 1972, but that it was simply part of a process of consultation designed to give the plaintiff a chance to put all information before it, before a decision was made.
[115] The Court of Appeal in Singh helpfully set out the matters which may guide a
Court, when a decision in question is not final:
73 Singh v Chief Executive of the Ministry of Business, Innovation and Employment, above n 41, at
[31].
74 Zaoui v Attorney-General (No 2) [2005] 1 NZLR 690 (CA).
75 Singh v Chief Executive of the Ministry of Business, Innovation and Employment, above n 41, at
[36] citing Marlborough Aquaculture Ltd v Chief Executive, Ministry of Fisheries [2003] NZAR
362 (HC) at [15].
(a) The nature of the statutory power being exercised.
(b) The stage that has been reached in the relevant statutory process.
(c) The extent to which the statutory power is likely to be influential in the ultimate decision.
(d)Whether there are any further opportunities in the statutory process to correct any apparent error including the availability of a right to appeal or seek judicial review of a decision ultimately reached at the conclusion of the statutory process.
[116] Applying the considerations in Singh to the facts in this case, they are:
(a) The Authority is exercising its statutory and regulatory requirement to consult on the TPM and the guidelines to be followed by Transpower, which is currently at stage two of the process, namely a consideration of the submissions received on its draft proposals. As such, it is a preliminary step in its consultation process.
(b)The stage that has been reached in the process is that the Authority has not made a final decision on the submissions it has received, but is still in the process of considering them and has announced it will consult further on refinements to the proposal for the new TPM guidelines when it issues a supplementary consultation paper on
6 December 2016. Further, the Authority has moved the implementation date in relation to the DGPP proposal till April 2018 at the earliest.
(c) The extent to which the Authority has exercised its statutory and regulatory power to date is to seek submissions on its draft proposals, which signal substantial change, including the abolition of the ACOT payments and the allocation of network common costs envisaged under the new DGPP proposals. The process challenge is to the time allocated for the submissions, being 10 weeks, which in itself, is unlikely to be influential in the ultimate decision. Indeed, the recent announcement from the Authority suggests that it is inviting further
submissions on a refinement on its proposals with advanced notice of its timeframes.
(d)There are further opportunities in the statutory process for the participants to challenge any apparent error, by way of judicial review of a decision ultimately reached at the conclusion of the statutory and regulatory consultation process. This would include any apparent bias, pre-determination or “confirmation bias” on the part of the Authority, which followed a “mindset” prior to the commencement of the consultation process.
Conclusion
[117] I have concluded that matters have reached only a preliminary stage in the Authority’s consultation process and the power exercised to this point is unlikely to be influential in the final decision. Each of the parties have provided the Court with meticulously argued and detailed submission and evidence, which demonstrate each of the parties’ perspectives on whether the draft proposals involve new criteria, whether they constitute a major change from the First Proposed Guidelines and whether the cost-benefit analysis in the draft TPM paper involves a fundamentally different methodology from that previously used by the Authority to evaluate costs and benefits.
[118] Before the court intervenes in a decision-maker’s process, it must be satisfied that there is a procedural impropriety,76 that there is some irretrievable flaw in the consultation process, or the decision is unreasonable.77
[119] In this proceeding, the Authority has informed the Court that it is still considering the submissions, including those from Trustpower seeking further procedural considerations, such as time and appropriate hearing procedures. Further, it is evident that the Authority has considered its position following this hearing and is providing a further opportunity to the participants to make submissions. In the
TPM paper, the Authority has foreshadowed that it would be appropriate for
76 Wellington International Airport Limited v Commerce Commission, above n 43 at [50].
77 Above n 53.
Transpower to adopt a consultation process in its development of the TPM. It follows that such a process must survive any challenge that Transpower’s ability to hold a meaningful consultation process has been hampered by restrictive guidelines imposed by the Authority. Nevertheless, the Authority specifically says:78
Transpower should decide the extent and form of that consultation process, including whether to invite cross-submissions.
[120] Both the Authority’s recent announcement that it will promulgate a further refined proposal for consultation in December 2016 and its suggestion that Transpower may consider conducting a consultation process, illustrates that any flaws in the current consultation preliminary steps are not irretrievable. Either of these further consultations would enable industry participants, such as Trustpower, to make further submissions.
[121] In both the Royal Brompton and Singh decisions, a factor weighing in the consideration as to whether a Court should intervene in a preliminary process issue is whether there is to be a further decision liable to be the subject of challenge. The ultimate decision of either Transpower or the Authority on the transmission pricing methodology, the ACOT payment and the DGPP proposals will be amenable to review. Thus, adopting the words of Arden LJ, if the Authority “fails to consider a significant matter or to reach a reasonable result by doing so, its further decision is liable to be the subject of challenge.”
[122] I accept that Trustpower’s process challenge is one that is justiciable, but I am declining Trustpower’s application for review. I am unable to find that the process has seriously gone off the rails or that any flaws in the process are irretrievable, such that the Court should intervene at this stage. It is also inappropriate for this Court to undertake a merits-based review of the Authority’s consultation process, when the Authority is currently undertaking an analysis of all the submissions, including those from Trustpower, both as to substance and as to process, and has yet to reach a
decision.
78 Clause 12.4 TPM, 2nd issues paper, 17 May 2016.
[123] I acknowledge that the proceeding concerns a $38 billion industry and that reforms are going have potential winners and losers, with millions of dollars at stake. The issues are vitally important to both the participants in the industry and the regulator but the Authority appears to be complying with the WIAL principles of consultation, as far as this Court can determine, and no Court intervention at this stage is justified.
[124] For completeness, the grounds of review pleaded in error of law, relevant considerations and unreasonableness are also declined.79
Result
[125] The application for judicial review is declined.
[126] Counsel have six weeks to confer on the question of costs. In the absence of agreement, counsel are to file memoranda.
Cull J
79 At [64] above, the other grounds of review are discussed.
APPENDIX 1 – CONSULTATION PROCESS FOR DEVELOPING THE TPM (FIGURE 8)80
80 Electricity Authority “Review of distributed generation pricing principles: consultation paper”
(17 May 2016), Figure 8: Process proposed for developing the TPM.
1
3
0