The Australian Energy Regulator (AER) has applied to the Federal Court for a judicial review of the Australian Competition Tribunal decisions to set aside the NSW and ACT electricity and gas distribution network revenue determinations.
In April and May 2015, the AER determined the maximum revenues that the electricity and gas distribution networks in NSW and the ACT could earn, and as a result what could be recovered through consumer bills.
The AER’s determinations allowed less revenue than proposed by the businesses.
These lower revenues were driven by AER findings that the NSW and ACT electricity networks were not operating as efficiently as other comparable networks. Additionally, the AER determined a lower rate of return and corporate tax allowance, consistent with recent market trends.
In June 2015 the gas and electricity distribution businesses sought a limited merits review of the AER’s final decisions in the Australian Competition Tribunal. The businesses were seeking greater revenue to be recovered from customers through electricity and gas bills for the period 2014–19.
In ruling on the appeal, the Tribunal found that the AER was correct in some matters, including how the cost of equity was to be calculated. However, the businesses were successful in some areas of their appeal, and the Tribunal directed the AER to remake its decisions in relation to the electricity networks’ operating expenses, the cost of corporate income tax, and the cost of debt.
“The AER’s aim is to set network revenues in the long term interests of consumers. After careful consideration, we have decided to appeal against the Tribunal’s decisions,” AER Chair Paula Conboy said.
“We have asked the Full Court to consider whether the grounds of review were properly established by the network businesses and whether these were correctly applied by the Tribunal.”
Ms Conboy confirmed that the AER will continue to consult with stakeholders about the remaking of its original decisions, as required under the Tribunal’s findings, in order to maximise certainty and stability while the judicial review is underway. This includes how prices should be set from 1 July 2016 and until new decisions are made.
The National Electricity Law and the National Gas Law provide for network businesses (and other parties) to apply to the Australian Competition Tribunal for a limited merits review of revenue determinations made by the AER.
The process is ‘limited’ in that an applicant to the Australian Competition Tribunal must demonstrate an error of fact, incorrect exercise of discretion, or unreasonableness by the AER. These are referred to as the grounds of review. One of the grounds of review must be established before the Tribunal can vary the decision or order the AER to remake it.