Application by East Australian Pipeline Limited [2005] ACompT 1

Application by East Australian Pipeline Limited [2005] ACompT 1

The Tribunal held that the Initial Capital Base should be based on DORC assessed on a hypothetical new entrant basis with tax treated on that basis, and that the discount rate should be post-tax WACC. The ACCC's attempted reliance on incumbent valuation and a risk free discount rate involved new substantive positions and impermissible or inappropriate reliance on material outside the review limits. EAPL's late attempt to use pre-tax WACC was also not permitted. No costs order was made.

Jurisdiction
Australia
Judgment Date
18 March 2005
Procedural Posture
Application Under S 39(1) of the Gas Pipeline Access Law for Review of the Decision of the Australian Competition and Consumer Commission to Approve Its Own Access Arrangement Under the National Third Party Access Code for Natural Gas Pipeline Systems and the Gas Pipeline Access Law / Reasons for Ruling on Implementation of Earlier Reasons, Disputed DORC Issues and Costs
Outcome
Proceeding stood over to enable a minute of orders to be brought in; disputed DORC issues determined; no order for costs made.
Legal Topics
['access to Gas Pipelines' 'national Third Party Access Code for Natural Gas Pipeline Systems' 'initial Capital Base' 'depreciated Optimised Replacement Cost' 'optimised Replacement Cost' 'hypothetical New Entrant' 'weighted Average Cost of Capital' 'australian Competition Tribunal Review' 'costs in Tribunal Review']
['trade Practices' 'energy Regulation' 'administrative Law' 'practice and Procedure' 'costs'] ['access to Gas Pipelines' 'national Third Party Access Code for Natural Gas Pipeline Systems' 'initial Capital Base' 'depreciated Optimised Replacement Cost' 'optimised Replacement Cost' 'hypothetical New Entrant' 'weighted Average Cost of Capital' 'australian Competition Tribunal Review' 'costs in Tribunal Review']

Case Brief

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Procedural Posture

Application Under S 39(1) of the Gas Pipeline Access Law for Review of the Decision of the Australian Competition and Consumer Commission to Approve Its Own Access Arrangement Under the National Third Party Access Code for Natural Gas Pipeline Systems and the Gas Pipeline Access Law / Reasons for Ruling on Implementation of Earlier Reasons, Disputed DORC Issues and Costs

Legal Issues

  1. 1 ['Whether DORC should be assessed from the point of view of a hypothetical new entrant or an incumbent pipeline owner' 'Whether the discount rate for the DORC calculation should be WACC or a risk free rate' 'Whether WACC should be calculated before or after tax' "Whether s 39(5) of the Gas Law prevented or made it inappropriate for the ACCC to raise new substantive positions after the Tribunal's earlier reasons" 'Whether EAPL should receive a costs order against the ACCC']

Ratio Decidendi

The Tribunal held that the Initial Capital Base should be based on DORC assessed on a hypothetical new entrant basis with tax treated on that basis, and that the discount rate should be post-tax WACC. The ACCC's attempted reliance on incumbent valuation and a risk free discount rate involved new substantive positions and impermissible or inappropriate reliance on material outside the review limits. EAPL's late attempt to use pre-tax WACC was also not permitted. No costs order was made.

Court Disposition

Proceeding stood over to enable a minute of orders to be brought in; disputed DORC issues determined; no order for costs made.

Orders

  • ['The proceeding stand over to enable a minute of orders to be brought in.' 'The ICB should be based upon DORC with tax on an HNE basis and the discount rate is to be post-tax WACC.' 'EAPL should bring in a minute of orders to give effect to these reasons.']