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On 26 February 2016, the Australian Competition Tribunal (Tribunal) issued its judgment in relation to merits reviews, sought by consumer groups and several regulated energy networks, of recent revenue reset Decisions issued by the Australian Energy Regulator (AER).

These were among the largest and most complex merits reviews of their kind seen to date in Australia, and the Tribunal’s judgment is likely to have far-reaching consequences for how energy networks will be regulated in future. This briefing analyses the Tribunal’s findings and discusses the implications for the AER’s future Decisions.DOWNLOAD FULL PUBLICATION


On 26 February 2016, the Australian Competition Tribunal (the Tribunal) handed down its judgment on merits reviews sought by a number of energy networks and consumers on revenue determinations made by the Australian Energy Regulator (AER) in 2015. The Tribunal found in favour of the networks on most issues and did not uphold the appeals brought by consumers.

These merits reviews were the latest of several that have been sought, and typically won, by networks against the AER over the years. Critics have suggested that the repeated success of the businesses is evidence that the appeal arrangements are stacked against the AER. Some have also argued that these reviews are too complex, expensive and bad for consumers.

A knee-jerk policy response to these criticisms might be to curtail the existing appeal arrangements. This new bulletin from Frontier (Australia) explains why a merits review regime is essential to a well-functioning regulatory system.

For more information, please contact Marita O'Keeffe on or phone +61 3 9620 4488.

Today the Australian Competition Tribunal published its judgments on several merits reviews of revenue reset decisions made by the Australian Energy Regulator (AER). These appeals, the most complex of their kind ever seen in Australia, were brought by the Public Interest Advocacy Centre (PIAC) on behalf of electricity consumers, three electricity distributors in New South Wales (NSW), one electricity distributor in the Australian Capital Territory, and one gas pipeline network operator in NSW. The revenue impact of the errors claimed by the appellants, over the forthcoming regulatory period, totalled in excess of A$8.5 billion. The issues on which review was sought were very wide-ranging. In terms of revenue impact, the most substantive issues related to the AER’s decisions on the return on equity allowance, the return on debt allowance, the value of imputation credits (for the purposes of determining the corporation tax allowance) and the AER’s use of benchmarking to determine operating expenditure allowances for the electricity distributors that sought review. Frontier (Australia and Europe, jointly) advised the networks involved in the appeals on all of these issues. The Tribunal found that the AER had erred in relation to all of these matters, except the return on equity, and has remitted them back to the AER for reconsideration. The Tribunal did not uphold the appeals brought by PIAC.

For more information, please contact Marita O’Keeffe on or phone +61 3 9620 4488.

Networks NSW has today announced that it intends to appeal some aspects of the Australian Energy Regulator’s (AER) determinations (made on 30 April 2015) on the revenues that these networks will be allowed to earn over the next few years.

The CEO of Networks NSW (which comprises Ausgrid, Essential Energy and Endeavour Energy) announced that it would appeal the AER’s decisions both regarding average annual cuts of $324m to operating expenditure and not to provide a workable transition plan to implement continuing efficiency improvements. Legal appeals will be lodged with the Australian Competition Tribunal today and with the Federal Court by 28 May.

One of the new tools that the AER used in order to justify significant reductions in operating expenditure allowances was benchmarking. Drawing on this approach, the AER concluded in its final decisions that the base year operating expenditures of Ausgrid and Essential Energy were inefficient and should be reduced by 24.0% and 26.4%, respectively. This represents a reduction in base year operating expenditure of $118 million for Ausgrid and $110 million for Essential Energy.

Other electricity networks have also been unhappy with the AER’s determinations. ActewAGL has already announced its decision to lodge legal appeals with the Federal Court and the Australian Competition Tribunal against the AER’s final decision.

Frontier (Australia) has advised Networks NSW on assessing the AER’s benchmarking analysis.

For more information, please contact or phone +61 3 9620 4488.