Limited Merits Review: Developments for Consumers

Tina Jelenic, Senior Policy Officer, Public Interest Advocacy Centre


There have been some significant developments in merits review space over the past few months. Significantly, the COAG Energy Council, at its meeting on 19 August 2016, initiated a review of the LMR framework. The review is to assess the effectiveness of the merits review regime since the 2013 reforms were implemented. The Senior Council of Officials was asked to explore all feasible options, including the removal of limited merits review altogether.

It seems clear that the LMR framework is still not providing an accessible avenue of review that is quick, inexpensive and informal and this presents a clear case for reform. However, the review has come at a time when it is difficult to fully assess the efficacy of the LMR process. The operation of the law remains unsettled, with the first decisions of the Tribunal under the new regime being the subject of ongoing judicial review. In this context, PIAC was wary of calling for significant legislative reforms that would lead to further uncertainty.

On balance, PIAC recommended targeted reforms to procedure and an increase in consumer resources as the most practical way to address the identified barriers. We submitted that the focus should be on streamlining and narrowing the Tribunal process, and enhancing the resources of and deference to the decisions of the AER.

We also highlighted concerns about the ability of consumers to participate in a system that lacks a mechanism for merits review.  A system that provides for only judicial review would require significant amendments to other parts of the regulatory regime to ensure an increase in genuine consumer involvement and accountability in the initial decision making process as well as an ability to participate fully in any process of judicial review.

The majority of stakeholders supported the option for amendments to the current LMR model, including through the development of a binding rate of return guideline. Some consumer organisations called for the removal of LMR altogether on the basis that it has not met its aims of timely and accessible review. The COAG Energy Council will respond to the consultation outcomes at its meeting in December.

In the meantime, there have been other developments in merits review processes.  In October, PIAC and the Commonwealth Minister were granted leave to intervene in the Full Federal Court judicial review hearings commenced by the AER for the NSW networks. The hearings centred around a number of issues, including the proper construction of the grounds of review in the National Electricity Law. The decision was reserved and is expected early next year.

On 28 October the Tribunal handed down its decision in the application by SA Power Networks. The decision rejected SAPN’s legal challenge, affirming the decision of the AER in its entirety. Over 50 paragraphs of the decision were devoted to the Consumer Consultation process, with the Tribunal giving detailed consideration to the submissions made by SACOSS, ECA and others.

The Tribunal found that it did not need to make direct reference to the consultation materials in making its determination because it found that error was not established. However, the Tribunal noted that the consultation materials would have been of significance if there had been a need to determine whether remitting or correcting the decision would be likely to lead to a materially preferable NEO decision.

Significantly, the Tribunal came to very different conclusions from the NSW Tribunal in PIAC- Ausgrid on what were very similar questions of statutory construction. The Tribunal refused to find error in the AER’s approach even though the questions before both tribunals about the AER’s methodology were very similar. SAPN has since sought judicial review of some aspects of the decision.

In Victoria, PIAC made a submission to the community consultation in relation to statutory construction and the proper role of the Tribunal with respect to the process. PIAC argued that community groups should not be restricted to three pages of written submissions. In response, the Tribunal extended the time frame for consumer groups to make written submissions, allowing them to put in an extra 10 pages of materials. PIAC and CUAC, along with many other organisations, provided written submissions to the Tribunal. The hearings concluded a week ago and a decision is expected next year.

Overall, the South Australian decision is significant in clarifying the role of consumer participation in the Tribunal’s decision-making process. It also demonstrates that the NSW decision may be of limited value in predicting how future Tribunals will make their determinations. This is particularly significant for the Victorian determinations.

The next few months are likely to bring further developments; we hope they will lead to a more consumer-centric model of network regulation.

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