The access arrangement decision made by the AER in June 2010 in respect of the Gas Distribution Network owned by Jemena Gas Networks (NSW) Ltd (JGN) was the subject of an application for review in the Australian Competition Tribunal (Tribunal).

JGN sought review of the decision made by the AER in respect of the following matters:

• the methodology and the estimation of the debt risk premium;
• the estimate of the value of the gamma (assumed utilisation of imputation credits);
• mine subsidence capital expenditure, specifically:
  • the reduction in the proposed amount of estimated or actual capital expenditure for mine subsidence in the opening capital base; and
  • the reclassification of the proposed amount of forecast capital expenditure for mine subsidence that was approved by the AER as forecast operating expenditure;
• the reduction of the opening capital base to remove the effect of the rate of return including inflation associated with the difference between the estimated and actual net capital expenditure (that is, the deduction of the weighted average cost of capital on the difference between actual and forecast net capital expenditure); and
• the inclusion in the Reference Services Agreement of clauses limiting the liability of users, including limitation of liability where the Service Provider’s action is inconsistent with that expected of a reasonable service provider.

On the 30 June 2011, the Tribunal made its final determination in relation to the access arrangement made by the AER in June 2010 for the NSW gas distribution networks owned by JGN. The determination varied four aspects of the access arrangement approved by the AER, namely:

• adjustment to the opening capital base (deduction of WACC)
• clauses in the Reference Services Agreement
• debt risk premium
• the assumed utilisation of imputation credits (gamma)

The Tribunal issued other reasons related to this appeal. Links to these earlier reasons:

• Tribunal direction and reasons on leave to appeal (grounds other than mine subsidence) - 13 October 2010
• Tribunal direction and reasons on leave to appeal (mine subsidence ground) - 11 February 2011
• Tribunal reasons for decision (mine subsidence, deduction of WACC, reference services agreement) - 25 February 2011
• Tribunal reasons for decision - 29 April 2011
• Tribunal reasons for decision (debt risk premium, gamma) - 9 June 2011

On 30 June 2011, the Tribunal made its final determination in relation to the access arrangement made by the AER in June 2010 for the NSW gas distribution networks owned by Jemena Gas Networks (JGN). The Tribunal remitted one issue, mine subsidence expenditure, back to the AER to make its decision again. The issue is whether JGN's monitoring costs associated with mine subsidence should be treated as capital expenditure or operating expenditure. The AER released its draft decision on this issue. The draft decision also addresses unrelated minor errors in the access arrangement and access arrangement information. Interested parties were invited to make written submissions on this draft decision by 26 August 2011.

The AER has released its final decision on the treatment of Jemena Gas Networks’ (JGN’s) mine subsidence expenditure. This matter was remitted back to the AER by the Tribunal in June 2011. In accordance with the Tribunal’s decision, expenditure on mine subsidence that the AER had previously classified as operating expenditure has been reclassified as capital expenditure. Moreover, the AER has decided that JGN’s monitoring costs associated with mine subsidence should be treated as capital expenditure.