Application by DBNGP (WA) Transmission Pty Ltd (No 3) [2012] ACompT 14

AUSTRALIAN COMPETITION TRIBUNAL

Application by DBNGP (WA) Transmission Pty Ltd (No 3) [2012] ACompT 14 Citation: Application by DBNGP (WA) Transmission Pty Ltd (No 3) [2012] ACompT 14

Review from: Economic Regulation Authority of Western Australia

Parties: DBNGP (WA) TRANSMISSION PTY LTD ON ITS OWN BEHALF AND ON BEHALF OF DBNGP (WA) NOMINEES PTY LTD AS TRUSTEE OF THE DBNGP WA PIPELINE TRUST, AND DBNGP (WA) NOMINEES PTY LTD AS TRUSTEE OF THE DBNGP WA PIPELINE TRUST

File number: ACT 2 of 2012

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

Date of decision: 26 July 2012

Catchwords: COMPETITION LAW – review of determination by the Economic Regulation Authority of Western Australia (ERA) – whether the ERA made reviewable errors in making Access Arrangement Decision – in particular: (a) whether the 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 rule 87(1) informs application of NGR rule 87(2)(b) – the 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 the ERA erred in using five-year government bonds to determine the risk free rate of return – whether the ERA's determination of the market risk premium (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 the ERA erred in estimating debt risk premium (DRP) – whether the ERA erred in determining the inflation rate by using the average of forecast inflation for a period of five years rather than for a period of ten years – whether the ERA should have based its 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 erred in determining the allowance for debt raising costs – whether the ERA erred incorrectly relied on regulatory precedent in determining the values of the components of the rate of return model; (c) whether the ERA erred in determining the value of the opening capital base – whether the ERA erred in escalating previous capital expenditure using a national measure of inflation rather than a local measure of inflation – whether the ERA erred in determining that a project management retainer fee was not conforming capital expenditure – whether the ERA erred in determining the value of conforming capital expenditure of a pipeline lease – whether the ERA erred in determining the depreciation period for a pipeline lease; (d) whether the ERA erred in failing to allow the full amount of claimed regulatory expenses; (e) whether the ERA erred in specifying the reference services for the access arrangement – whether the ERA erred in failing to include a full haul service as the only reference service – whether the ERA erred in including a full haul service, a part haul service and a back haul service as reference services – whether the ERA erred in defining the part haul reference service – where the total capacity of the pipeline was already fully contracted for the access arrangement period; and (f) whether the ERA erred in determining that the access arrangement would apply to any incremental services provided as a result of increases in the expansion of the pipeline unless the Applicant could demonstrate that such application was inconsistent with the national gas objective.