High Court overturns ACCC decision on access to the Moomba to Sydney Pipeline
The High Court of Australia has upheld an appeal by East Australian Pipeline Limited against a decision of the Full Federal Court, which had affirmed the ACCC's rejection of the access arrangement for the Moomba to Sydney Pipeline.
The principal issue in the appeal was the construction of the National Third Party Access Code for Natural Gas Pipeline Systems and the methodology used by the ACCC to establish the initial capital base for the pipeline. In 2006 the Full Federal Court, in a unanimous judgment, found that the ACCC's decision on the initial capital base was made in accordance with the Code. The High Court has overturned the Federal Court's decision.
"The High Court recognised that setting tariffs for monopoly service providers is a difficult and vexing task," ACCC Chairman, Mr Graeme Samuel, said today.
"This is complex legislation that requires the ACCC to balance a wide range of interests, including the interests of pipeline operators, investors and users.
"The High Court has found that the ACCC and the Federal Court erred in their interpretation of the Code in the present case. While the ACCC is disappointed with this result, its primary goal is to ensure there is clarity surrounding the laws governing gas pipeline regulation in this country."
Mr Samuel said the ACCC will review this decision to determine whether it has any implications for the future regulation of gas pipelines by the ACCC and the Australian Energy Regulator.
In 2003, the ACCC rejected the access arrangement for the Moomba to Sydney Pipeline ("MSP") proposed by East Australian Pipeline Limited ("EAPL") and substituted its own access arrangement instead. In 2004, the Australian Competition Tribunal set aside several aspects of the ACCC's decision. Specifically, the Tribunal:
rejected the ACCC's methodology for the calculation of the initial capital base ("ICB")
overturned the ACCC's refusal to include of a contingency allowance in the ICB
determined that the Weighted Average Cost of Capital should be based on a 10 year bond rate and credit rating of BBB.
The ACCC appealed to the Federal Court in relation to the methodology for establishing the ICB. In 2006, the Full Federal Court reversed the Tribunal's decision, finding that the Tribunal had no basis to set aside the ICB established by the ACCC.
EAPL appealed to the High Court against the Federal Court's decision. On 27 September 2007 the High Court upheld this appeal, finding that the ACCC and the Federal Court misconstrued section 8.10 of the Code in setting the ICB for the pipeline.
The effect of this decision is to reinstate the ICB of $834.66 million established by the Tribunal in 2005. This contrasts to the ICB of $545.4 million established by the ACCC in 2003.
