The role of courts and tribunals in providing guidance to regulators - - PowerPoint PPT Presentation

The role of courts and tribunals in providing guidance to regulators

A quest for value – The epic saga of the Moomba to Sydney Pipeline

Justin Oliver Special Counsel Minter Ellison

The Moomba to Sydney Pipeline

• A major gas transmission pipeline
• Regulated under the Gas Code since 1998
• EAPL required to submit a proposed access

arrangement to the ACCC

• Access arrangement contains reference tariffs
• Access arrangement considered in parallel

with revocation application

• Partial revocation of coverage
• A very lengthy process

The Initial Capital Base

• ICB is a step in determining reference tariffs
• Existing pipeline – 8.10 sets out factors
• DAC
• DORC
• Other “well recognised” methodologies
• Pros and cons of each
• Other factors
• ICB normally between DAC and DORC (8.11)

ACCC decision

• EAPL proposed ICB of $784-$997 million
• ACCC rejected this figure
• Section 8.10
• ACCC started with ORC
• “Kinked” depreciation profile to arrive at ICB
• Based on past tariffs and depreciation

(8.10(f))

• Substituted ICB of $545.4 million

Australian Competition Tribunal

• Limited merits review
• ACCC erred - there is an order to s 8.10
• 1. consider 8.10(a), (b) and (c)
• 2. assess pros and cons of each (8.10(d))
• 3. use 8.10(e)-(k) to help choose between them
• may justify adjustment to chosen methodology
• will rarely (if ever) allow well recognised

methodologies to be put aside

• ICB of $834.66 million

Federal Court

• Judicial review – Full Court
• No error in ACCC decision
• There is no order to 8.10
• Regulator need only take each factor into

account to arrive at ICB

• ORC can be adjusted by reference to 8.10(f)

High Court

• Federal Court decision set aside
• Gleeson CJ, Heydon, Crennan JJ
• There is an order to 8.10
• Agreed with Tribunal
• Gummow, Hayne JJ
• There is an order to 8.10
• A narrower role for 8.10(e) to (k)?

Gleeson CJ, Heydon, Crennan JJ

• Key objective – provide a return on

investment commensurate with

• prevailing conditions in market for funds
• risk involved
• Regulatory uncertainty increases risk
• Regulator’s discretion, while wide, must be

limited

• An outcome that is novel or idiosyncratic

should not be permitted

Relevant objectives

• The Gas Code contains objectives
• Introduction, 2.24, 8.1
• These do not include providing a rate of return

commensurate with market conditions and risk

• This objective was derived from context
• 8.30 - rate of return
• There is a purposive relationship between ICB and

rate of return

Lessons

• Objectives are critical in interpretation
• Objectives are not always obvious
• Recognising risk is an objective of most access

laws

• Does this mean the regulator’s discretion will

always be constrained by the need to minimise uncertainty?

• Keep it simple!