Application by GasNet Australia (Operations) Pty Ltd [2003] ACompT 6

Application by GasNet Australia (Operations) Pty Ltd [2003] ACompT 6

The ACCC committed reviewable error by applying CAPM inconsistently, including by using different risk-free rates within the CAPM calculation and by determining for itself a Rate of Return when GasNet's CAPM-based proposal was consistent with the Code. The ACCC's rejection of GasNet's late sculpted inflation proposal was not shown to be incorrect or unreasonable. The non-capital cost issues were resolved by concession in GasNet's favour. The decision therefore required variation to allow a ten year Commonwealth bond real risk-free rate, specified debt raising and asymmetric risk allowances, and specified pass through events.

Jurisdiction
Australia
Judgment Date
23 December 2003
Procedural Posture
Application for Review of a Decision by the Australian Competition and Consumer Commission in Connection With Revisions to an Access Arrangement for a Gas Transmission System / Final Orders and Reasons for Judgment, With Addendum as to Costs
Outcome
The ACCC's decision was varied with effect from 1 January 2004; no order was made as to costs.
Legal Topics
['third Party Access to Gas Pipelines' 'access Arrangements' 'reference Tariffs' 'rate of Return' 'capital Asset Pricing Model' 'inflation Forecasts' 'non Capital Costs' 'australian Competition Tribunal Review']
['competition and Consumer Law' 'energy Regulation' 'administrative Review'] ['third Party Access to Gas Pipelines' 'access Arrangements' 'reference Tariffs' 'rate of Return' 'capital Asset Pricing Model' 'inflation Forecasts' 'non Capital Costs' 'australian Competition Tribunal Review']

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Procedural Posture

Application for Review of a Decision by the Australian Competition and Consumer Commission in Connection With Revisions to an Access Arrangement for a Gas Transmission System / Final Orders and Reasons for Judgment, With Addendum as to Costs

Legal Issues

  1. 1 ['Whether the ACCC erred in using a five year Commonwealth bond rate rather than a ten year Commonwealth bond rate in applying the CAPM to determine the Rate of Return.' "Whether the ACCC erred in rejecting GasNet's sculpted inflation forecast and using a single annual inflation rate for the access arrangement period." "Whether the ACCC's determinations of allowances for counterparty default, terrorist risk, uplift liability, key person risk and employment practices risk should be varied." "Whether the ACCC approached its task incorrectly by substituting what it considered the most appropriate access arrangement rather than asking whether GasNet's proposed access arrangement complied with the Code."]

Ratio Decidendi

The ACCC committed reviewable error by applying CAPM inconsistently, including by using different risk-free rates within the CAPM calculation and by determining for itself a Rate of Return when GasNet's CAPM-based proposal was consistent with the Code. The ACCC's rejection of GasNet's late sculpted inflation proposal was not shown to be incorrect or unreasonable. The non-capital cost issues were resolved by concession in GasNet's favour. The decision therefore required variation to allow a ten year Commonwealth bond real risk-free rate, specified debt raising and asymmetric risk allowances, and specified pass through events.

Court Disposition

The ACCC's decision was varied with effect from 1 January 2004; no order was made as to costs.

Orders

  • ["The decision of the Australian Competition and Consumer Commission under s 2.42 of the National Third Party Access Code for Natural Gas Pipeline Systems to draft and approve its own amended revisions to the Access Arrangement for GasNet's gas transmission system be varied." 'The decision be varied with effect from...