Application by Energex Limited (No 2) [2010] ACompT 7

Application by Energex Limited (No 2) [2010] ACompT 7

The Tribunal found that the AER made material errors of fact in its determination of both the distribution ratio (F) and the utilisation rate (theta) used to calculate the gamma parameter for the purposes of the distribution determinations. Specifically, the AER incorrectly interpreted and applied data from key studies (including averaging upper bounds and point estimates contrary to their methodological roles, and logic errors in combining different study types) and failed properly to respond to persuasive evidence that warranted departure from the value of gamma as set in the SORI. The Tribunal concluded that further submissions and expert analysis were required before setting...

Jurisdiction
Australia
Judgment Date
13 October 2010
Procedural Posture
Application for Review of an Administrative Determination / Reasons for Decision After Hearing and Before Final Directions
Outcome
The Tribunal found errors of fact and incorrect exercises of discretion by the AER regarding both the distribution ratio and theta components of gamma, and required further procedure before final substantive determination.
Legal Topics
['merits Review of Regulatory Determinations' 'national Electricity Law S 71 B Applications' 'electricity Distribution Pricing' 'imputation Credits (gamma) Parameter' 'weighted Average Cost of Capital (wacc)']
['administrative Law' 'energy Law' 'regulatory Law'] ['merits Review of Regulatory Determinations' 'national Electricity Law S 71 B Applications' 'electricity Distribution Pricing' 'imputation Credits (gamma) Parameter' 'weighted Average Cost of Capital (wacc)']

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Procedural Posture

Application for Review of an Administrative Determination / Reasons for Decision After Hearing and Before Final Directions

Legal Issues

  1. 1 ['Whether the Australian Energy Regulator (AER) made errors of fact in determining components of the gamma parameter (distribution ratio and utilisation rate) in distribution determinations for electricity distribution service providers for 2010–2015 period.' 'Whether there was persuasive evidence justifying a departure from the value for gamma set in the Statement of Regulatory Intent (SORI).' 'Whether any error was material to the determinations and whether any exercise of discretion was unreasonable or incorrect under s 71C of the National Electricity Law (NEL).']

Ratio Decidendi

The Tribunal found that the AER made material errors of fact in its determination of both the distribution ratio (F) and the utilisation rate (theta) used to calculate the gamma parameter for the purposes of the distribution determinations. Specifically, the AER incorrectly interpreted and applied data from key studies (including averaging upper bounds and point estimates contrary to their methodological roles, and logic errors in combining different study types) and failed properly to respond to persuasive evidence that warranted departure from the value of gamma as set in the SORI. The Tribunal concluded that further submissions and expert analysis were required before setting...

Court Disposition

The Tribunal found errors of fact and incorrect exercises of discretion by the AER regarding both the distribution ratio and theta components of gamma, and required further procedure before final substantive determination.

Orders

  • ['AER to report to the Tribunal on the errors found in both distribution ratio and theta and propose an approach that correctly uses tax statistics and dividend drop-off studies, reviewing all available studies.' 'AER to seek a new, state-of-the-art dividend drop-off study in consultation with SFG and with expert...