Vector Limited v Electricity Authority - [2018] NZCA 543

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IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA481/2017
[2018] NZCA 543

BETWEEN	VECTOR LIMITED First Appellant PAUL HUTCHISON, WILLIAM CAIRNS, JAMES CARMICHAEL, KAREN SHERRY AND MICHAEL BUCZKOWSKI Second Appellants
AND	ELECTRICITY AUTHORITY Respondent

Hearing:	9 May 2018 (further submissions received on 30 May 2018)
Court:	Kós P, Winkelmann and Asher JJ
Counsel:	J A Farmer QC and S M Hunter for First Appellant D R Bigio QC for Second Appellants A R Galbraith QC and L A O’Gorman for Respondent D A Laurenson QC and J L W Wass for Commerce Commission as interveners
Judgment:	30 November 2018 at 3.00 pm

JUDGMENT OF THE COURT

AThe appeal is allowed in part.
BA declaration is made that proposed cls 12A.4(1)(b) and 12A.10(2) of the Electricity Industry Participation Code 2010 would be unlawful.
CFurther directions are given at [59] of this judgment for the determination of Issue 2.
D Costs are reserved.

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REASONS OF THE COURT

(Given by Kós P)

May the Electricity Authority prescribe standard terms for contracts between distributors and retailers of electricity? In particular, may it prohibit individually‑negotiated terms in distribution agreements? Simon France J held that the Authority could do both.[1] Vector Ltd, one such distributor of electricity, and its principal shareholders, the second appellants, now appeal.[2]

Background

[1]Vector Ltd v Electricity Authority [2017] NZHC 1774 [High Court judgment].

[2]The second appellants are trustees of Entrust, an electricity consumer trust which hold three quarters of Vector’s share capital.

We may begin by largely adopting the Judge’s summary of background facts.[3]
[3]High Court judgment, above n 1, at [1]–[6].
The Electricity Authority was established by the Electricity Industry Act 2010 (the Act). Its role is to make and administer the Electricity Industry Participation Code 2010, to monitor compliance with that Code and to enforce it.
The New Zealand electricity industry comprises four sectors: generation, transmission, distribution and retail. Generators and retailers are permitted to be vertically integrated, but the intermediate sectors must be distinct. Transmission is undertaken by the national grid operator, Transpower. Some large industrial consumers connect directly to the grid. But otherwise Transpower transmits electricity to distributors (that is, lines companies). Distributors convey the electricity to retailers. Retailers buy electricity from generators through a wholesale market and sell it on to consumers.
Retailers must enter into agreements with distributors to use the distributor’s network to get the electricity to their customers. These agreements are known in the industry as use-of-system agreements.[4] The Authority intends to make changes to the Code that will affect UoSAs.
[4]Referred to hereafter as “UoSAs”.
From the distributors’ viewpoint, the Authority’s proposals mean that much of the content of UoSAs will be set and made mandatory by the Authority unless the retailer agrees to different provisions. It is common ground that these new proposals, if implemented, will result in significant portions of the contracts being fixed. Indeed that is the Authority’s objective. It…

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.

Continue reading Vector Limited v Electricity Authority

Details

AGLC: Vector Limited v Electricity Authority [2018] NZCA 543
Case: [2018] NZCA 543
Decision Date: 30 November 2018 at 3.00 pm

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal from Vector Limited and its principal shareholders against the Electricity Authority's proposed amendments to the Electricity Industry Participation Code 2010, which would standardise the terms of distribution agreements between electricity distributors and retailers. The appellants argued that the proposed changes went beyond the Authority's powers under the Electricity Industry Act 2010, which established the Authority and set out its objectives, functions, and powers. The appellants also claimed that the proposed changes violated their freedom of contract and association under the New Zealand Bill of Rights Act 1990.

The Court of Appeal held that the Authority had the power to amend the Code to require distributors to offer retailers a default use-of-system agreement (UoSA) on terms prescribed by the Authority. However, the Court held that the proposed changes went beyond the Authority's powers because they purported to exclude any other terms in a distributor agreement. The Court held that the statutory language did not reach as far as the Authority would have the Court go, and that the necessity for the proposed clauses was never demonstrated to the Court's satisfaction.

The Court also held that the Authority's proposed changes may infringe the appellants' rights of freedom of expression or association under the New Zealand Bill of Rights Act, but that it was not necessary to reach a view on this aspect of the argument given the absence of oral argument on it.

The Court of Appeal allowed the appeal in part, declaring that proposed clauses 12A.4(1)(b) and 12A.10(2) of the Electricity Industry Participation Code 2010 would be unlawful. The Court gave further directions for the determination of the second issue, which concerned whether section 32(2) of the Act prohibited the Authority from amending the Code to require distributors to offer a default UoSA because such amendments prescribed quality standards for distributors, a matter reserved to the Commerce Commission. Costs were reserved.

Orders