Application by SA Power Networks [2016] ACompT 11

AUSTRALIAN COMPETITION TRIBUNAL

Application by SA Power Networks [2016] ACompT 11 Review from: Australian Energy Regulator

File number: ACT 11 of 2015

Tribunal: MIDDLETON J (PRESIDENT) PROFESSOR KT DAVIS (MEMBER) MR R STEINWALL (MEMBER)

Intervener: South Australian Minister for Mineral Resources and Energy

Date of Determination: 28 October 2016

Catchwords: ENERGY AND RESOURCES – applications under s 71B of the National Electricity Law (NEL) for review of a distribution determination by the AER – consideration of the legislative background to the NEL and the National Electricity Rules (NER) – amendments to the NER made in 2012 by the Australian Energy Market Commission (AEMC) – amendments to the NEL made in 2013 – role of the AER – national electricity objective (NEO) – consultation and notification obligations under s 16(1)(b) – conduct of consultation process under s 71R(1) – relevance of Applications by Public Interest Advocacy Centre Ltd and Ausgrid (Ausgrid) – topics for review – gamma – return on debt – forecast bushfire safety capital expenditure (capex) – forecast labour cost escalation – forecast inflation ENERGY AND RESOURCES – gamma – building block determination – significance of the substitution of "the value of imputation credits" for "the assumed utilisation of imputation credits" in the definition of gamma – valuation of imputation credits – theoretical models – empirical evidence – relevance of the Ausgrid decision – proper use of the distribution rate, equity ownership data and tax statistics ENERGY AND RESOURCES – return on debt – transition arrangements for the debt risk premium component of the cost of debt – gradual transition compared with immediate transition – allowed rate of return objective – promotion of efficient financing practices – bias in regulatory decision-making – historical data problems – impact of change on benchmark efficient entity and recovery of efficient financing costs – meaning of "across regulatory control periods" – windfall gains and losses ENERGY AND RESOURCES – forecast bushfire safety capex – capex objectives and criteria – meaning of "regulatory obligation or requirement" – the nature of regulatory obligations – Electricity Act 1996 (SA) – Fair Work Act 2009 (Cth) – decisions of AER not to be approached in overly rigid way – compliance with capex criteria ENERGY AND RESOURCES – forecast labour cost escalation – whether enterprise agreement is a "regulatory obligation or requirement" – operating expenditure (opex) objectives and criteria – capex objectives and criteria – character of enterprise agreements – relevance of the Ausgrid decision ENERGY AND RESOURCES – forecast inflation – post-tax revenue model (PTRM) – building block determination – whether AER can consider inflation outside the PTRM