Application by Envestra Ltd (No 2) [2012] ACompT 3

Application by Envestra Ltd (No 2) [2012] ACompT 3

The Tribunal found reviewable error in the AER's rejection of the sole use of the EBV for DRP and its averaging with the APA bond without adequate analysis; and in the AER's disallowance of the NMF, as the evidence showed it yielded efficient lower costs in accordance with industry practice and Rule 91. The Tribunal did not find error in the AER's determination of MRP at 6% or its UAG allowance, as those decisions were reasonably open on the evidence. Thus, the decision was varied to substitute 4.67% for DRP and to allow recovery of the NMF; all other AER decisions affirmed.

Jurisdiction
Australia
Judgment Date
11 January 2012
Procedural Posture
Application for Review of Regulatory Decision / Decision After Tribunal Hearing on Review of AER Access Arrangement Decision
Outcome
Decision of AER varied in part, affirmed in part.
Legal Topics
['judicial/administrative Review' 'error of Fact' 'exercise of Discretion' 'reasonableness Standard' 'energy Regulation – Gas' 'regulatory Pricing and Cost of Service' 'efficient Costs' 'operating and Capital Expenditure' 'network Outsourcing' 'access Arrangement' 'market Risk Premium (mrp)' 'debt Risk Premium (drp)']
['administrative Law' 'competition Law' 'energy Regulation'] ['judicial/administrative Review' 'error of Fact' 'exercise of Discretion' 'reasonableness Standard' 'energy Regulation – Gas' 'regulatory Pricing and Cost of Service' 'efficient Costs' 'operating and Capital Expenditure' 'network Outsourcing' 'access Arrangement' 'market Risk Premium (mrp)' 'debt Risk Premium (drp)']

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Procedural Posture

Application for Review of Regulatory Decision / Decision After Tribunal Hearing on Review of AER Access Arrangement Decision

Legal Issues

  1. 1 ["Whether the AER erred in determining the Debt Risk Premium (DRP) for Envestra's network;" 'Whether the AER erred in determining the Market Risk Premium (MRP);' 'Whether the AER erred in disallowing the Network Management Fee (NMF) as efficient operating expenditure;' "Whether the AER erred in rejecting Envestra's forecast for Unaccounted for Gas (UAG) volumes."]

Ratio Decidendi

The Tribunal found reviewable error in the AER's rejection of the sole use of the EBV for DRP and its averaging with the APA bond without adequate analysis; and in the AER's disallowance of the NMF, as the evidence showed it yielded efficient lower costs in accordance with industry practice and Rule 91. The Tribunal did not find error in the AER's determination of MRP at 6% or its UAG allowance, as those decisions were reasonably open on the evidence. Thus, the decision was varied to substitute 4.67% for DRP and to allow recovery of the NMF; all other AER decisions affirmed.

Court Disposition

Decision of AER varied in part, affirmed in part.

Orders

  • ['The DRP figure of 3.81% is replaced by 4.67% for the purposes of calculating the cost of debt.' 'Envestra is entitled to recover the network management fee (3% of revenue) payable to APA under the OMA.' "The AER's determinations in relation to the market risk premium and the unaccounted for gas volume forecast are...