Application by WA Gas Networks Pty Ltd (No 3) [2012] ACompT 12

AUSTRALIAN COMPETITION TRIBUNAL

Application by WA Gas Networks Pty Ltd (No 3) [2012] ACompT 12 Citation: Application by WA Gas Networks Pty Ltd (No 3) [2012] ACompT 12 Review from: Economic Regulation Authority Parties: WA GAS NETWORKS PTY LTD NOW KNOWN AS ATCO GAS AUSTRALIA PTY LTD

File number: ACT 3 of 2011

Tribunal: MANSFIELD J (PRESIDENT) MR R DAVEY (MEMBER) PROFESSOR D ROUND (MEMBER)

Date of decision: 8 June 2012

Catchwords: COMPETITION LAW – review of determination by the Economic Regulation Authority of Western Australia (ERA) – whether ERA made reviewable errors in making Access Arrangement Decision – in particular (a) whether ERA applied NGR rule 87 correctly – whether NGR rule 87(1) requires the ERA to go beyond the figure determined in accordance with NGR rule 87(2)(b) – NGR rules 87(1) informs application of NGR 87(2)(b) – ERA not required to adjust the rate of return determined in accordance with NGR r 87(2)(b); (b) whether the ERA erred in determining the rate of return on capital – whether components of rate of return incorrect – whether ERA's determination of the MRP was not supported by evidence having regard to current financial market conditions – whether the ERA erred in determining the value of imputation credits – whether ERA erred in estimating DRP – whether the ERA should have based determination of DRP on evidence of total cost of debt funding submitted by the Applicant – whether the ERA's bond yield approach was in error – whether the ERA incorrectly rejected inclusion of allowance for pre-financing costs; (c) whether the ERA, in escalating previous capital expenditure, erred in using a national measure of inflation rather than a local measure of inflation – whether ERA erred in escalating previous capital expenditure only from the end of the year in which it was expended; (d) whether the ERA erred in failing to allow the inclusion of bridging finance costs as allowable operational expenditure – where costs of bridging finance incurred as a result of unexpected delay in commencement of new regulatory regime – whether bridging finance costs would have been incurred by an efficient service provider acting prudently; (e) whether the ERA erred in not including any allowance for working capital in allowable operational expenditure; (f) whether the ERA erred in excluding from the tariff variation mechanism provision for adjustment as a result of unexpected regulatory capital expenditure – whether inclusion of such a provision required to permit Applicant to recover at least its efficient costs of providing the reference services and of complying with a regulatory obligation – whether exclusion of provision for capital expenditure capricious where ERA permits provision for recovery of operational expenditure; and (g) whether the ERA erred in excluding terms and conditions from the template haulage contract that it determined were purely commercial in nature – whether such exclusion inconsistent with NGR rule 48(1)(d)(ii) – whether any reasoned basis for excluding such terms – whether ERA erred in excluding particular terms.