Citipower Pty v Regulator General and Powercor Australia Limited [1999] VSC 348

38. In the lengthy paper constituting the Draft Decision, the Regulator General canvassed the matters which had been taken into account, both in assessing his legal power and as to his analysis of the competing practical, policy and other considerations which were raised by the applications. He announced that the Office had tentatively decided to issue Powercor with a new and additional licence, to distribute electricity in the Docklands area, and to provide distribution services by means of a "trunk infrastructure" (which was said to be the infrastructure that brings services to the boundary of the seven individual development precincts which constituted the Docklands development). The licence would also allow Powercor to provide services by means of any distribution assets over which Powercor obtained control.

41. In stating the tentative conclusion, the Draft Decision made a series of pronouncements which demonstrated, Mr Young QC submitted, on behalf of Citipower, that the Office was intending to act beyond its powers under the relevant legislation. Mr Beach, counsel for the Office, submitted that I should have no regard to the Draft Decision, as it did not constitute the exercise of power. Were I to act against the Office by reference to the Draft Decision I would be interfering in a decision making process which is yet to conclude. It is submitted that the Office has not yet made a decision, and accordingly I could not make an order even if I felt that the Office had demonstrated its intention to act on a mistaken understanding of its power. There has been no decision taken by the Office, and a preliminary or recommendatory statement is not sufficient to constitute a reviewable decision, so it was submitted: AB v Lewis [1980] VicRp 18; [1980] VR 151; Nicol v Attorney General [1982] VicRp 33; [1982] VR 353. A preliminary decision to merely consider the application is not sufficient to provide the basis for relief, as though a final decision had been taken: Australia Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321. These cases, however, are not to point, as all are concerned with particular provisions allowing administrative appeals. The situation here is one where the Office has itself announced an intended course, and the plaintiff contends that that proposed course demonstrates a wrong view of its powers.

44. In my opinion, were I to conclude that the Draft Decision does disclose a misapprehension by the Office as to its power, I would be entitled to make a declaration to that effect, and indeed, the very fact that a Draft Decision has been published virtually invites the court to make such a declaration, if such error is manifest. Thus, where the Regulator General states, at page 16, that "there is no legal obstacle to a decision by the office to issue a licence to another party (eg. Powercor) to provide electricity distribution services in the Docklands", I would be entitled to declare that assertion to be wrong in law, if that was my conclusion, even though the Office has not made a final pronouncement to that effect.

47. I agree with Mr Beach, however, that my decision must be confined to the question of the existence, or otherwise, of the statutory powers by the Office. I am not concerned in this case to evaluate and review the exercise of its powers. I am in no position to evaluate the factors to which the Regulator General has had regard in deciding, tentatively, that Powercor is an appropriate recipient of such a licence. Having said that, however, it is appropriate that I note some of the findings made in the Draft Decision because they may be relevant to the question whether the Office has misconceived the powers which it holds under the relevant legislation.

50. The Regulator General acknowledged in the Draft Decision that the ultimate provider of distribution services to Docklands was likely to become, and remain, a monopoly supplier. Additionally, he concluded that if Powercor was granted the distribution licence to provide the trunk infrastructure, that was not likely to be the least-cost option. The Office was of the opinion, however, that were Powercor to succeed in its application it would enhance competition to provide distribution assets within the Docklands precincts. ("Distribution fixed assets" are defined in the licence, in clause 1, and appear to constitute the electrical wires running from the trunk infrastructure to the area, or general location, of the end user - the lines along the streets rather than the lines into the houses, was how counsel described it to me). Distribution fixed assets would, I believe, include "trunk assets", ie. equipment used to transform electricity to a lower voltage.

53. The trunk infrastructure, according to the Draft Decision, represented only a very small part of the overall costs of providing those distribution assets which would be required for Docklands. As yet, no decisions had been made as to who would provide those other assets. It was noted, at pages 19-21, that once the distribution assets were in place, then the high cost of their provision would have strong natural monopoly characteristics. A competing service could not be provided without building a duplicate network, in whole or part. That was an unlikely event, so that there was likely to be only one supplier of distribution services in the area once the assets were controlled by that party.

56. The Draft Decision noted that Citipower had existing, extensive, distribution infrastructure near the boundaries of Docklands, and had provided the entire infrastructure which had been required, to date, not only within the Docklands area, but throughout its licence area.

59. Without concerning myself with the detail of the decision, nor summarising the contents of the Draft Decision, it is plain that in reaching his tentative decision the Regulator General considered an extensive range of technical and cost factors, and had given prominence to the likely effect on the reduction of costs to consumers if the new licence was granted.

63. In the two proceedings which are before me Citipower seeks relief by way of certiorari or prohibition to prevent the Office of Regulator-General ("the Office") granting to Powercor either a new distribution licence, or a variation of an existing licence, and, alternatively, seeks declarations that it would be beyond power for the Office of Regulator General to grant the proposed licence or variation of licence.

66. There was a good deal of force in the complaints of Mr Murdoch QC, senior counsel for Powercor, that the arguments advanced by Mr Young QC for the plaintiff ranged well beyond those encompassed by the terms of the originating motions, or in the written outline of argument which had been filed pursuant to an order of the Listing Master. That is no doubt explained by the fact that Mr Young came into the case at a very late stage, and no doubt it was by virtue of that fact that Mr Young (and consequently, and for the most part, counsel for the defendants) made almost no reference to the outline of argument which had been filed prior to his involvement. In an address which occupied three days, Mr Young referred to a wide range of material contained in many lever arch files of documents, together with a great many legal authorities. The absence of an outline of argument, in those circumstances, made my task more difficult, as it no doubt also did for counsel for the defendants.

69. Notwithstanding the difficulties which had been caused to the defendants by departure from the expected areas of argument, I allowed amendments to the terms of the originating motions, and permitted the new, and wide ranging, arguments to be advanced, as it seemed to me to be in the interests of all parties that the real areas of controversy be identified and be litigated at the earliest opportunity.

72. The Office of Regulator General itself advanced substantial arguments in opposition to the plaintiff's applications. Mr Beach, counsel for the Office, acknowledged that it would only be in exceptional circumstances that a body such as his client would appear, so as to argue a case, in proceedings where a party was challenging the exercise of its powers. Mr Beach submitted that in presenting its arguments his client was not adopting the position of a protagonist, but was confining its argument to the question of the powers and procedures of the Office, a course not disapproved by the High Court: see R v Australian Broadcasting Tribunal; Ex Parte Hardiman [1980] HCA 13; 29 ALR 289 at 306. Although I felt that the arguments went beyond those limits, at times (counsel for the second defendant, for the most part adopting those as arguments on behalf of his client also), no objection was taken by the plaintiff to Mr Beach's presentation, and the fact that counsel for the plaintiff was himself permitted to amend the originating motions so as to present argument which ranged beyond those originally enunciated in the originating motions would make it difficult for any complaint to be seriously advanced by the plaintiff against the role adopted by Mr Beach on behalf of the Office.

75. In essence, Citipower contends that the legislation permits there to be only one distribution licence over any given area in the State. Distribution licences can not overlap, so it submits, and the legislation accepts and preserves a monopoly over distribution and supply held by the holder of any such licence. The legislation, according to Citipower, expressly prevents the Office from creating a situation of competition between distribution licences holders over the same areas of land. The defendants deny that any such prohibition appears in the legislation, and contend that it is within power for the Office to issue overlapping distribution licences over the same area.

78. The determination of the question of the powers held by the Office will depend, in the first place, upon interpretation of the relevant terms of the Electricity Industry Act 1993 ("the Act"), as much amended, and the terms of the Office of the Regulator-General Act 1994. The legislation which governed the regulation of the electricity industry, and the granting of new licences or variations of licences, was contained in Part 12 of the Act, introduced in 1994.

82. In interpreting the legislation, and determining the intention of the legislature, Mr Young QC, for Citipower, sought to refer to a wide variety of extrinsic materials. He submitted that he was entitled to do so by application of s. 35 of the Interpretation of Legislation Act 1984. Among the material referred to were three reports published for the Government through the Office of State Owned Enterprises of the Department of the Treasury, and, also, Hansard extracts and Explanatory Memoranda relating to the Second Reading Speeches when the relevant legislation was introduced. Counsel for the defendants submitted that recourse to such material was unnecessary, because the intention of the Parliament was clear from the terms of the legislation. If recourse was to be had to extrinsic material then they objected to use being made of the first of those reports, but the main objections related to a range of other material on which Mr Young sought to rely.

85. Mr Young sought to refer to the terms of the licences issued to the plaintiff and second defendant and to a wide range of Codes and other instruments published or promulgated by the Office. Counsel for both the first and the second defendants objected to my having regard to much of the material which Mr Young sought to call in aid of interpretation of the legislation as extrinsic material pursuant to s. 35 of the Interpretation of Legislation Act. It is appropriate that I address this issue at the outset.

88. Section 35 provides as follows:

"35. Principles of and aids to interpretation

In the interpretation of a provision of an Act or subordinate instrument--

(a) a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object; and

(b) consideration may be given to any matter or document that is relevant including but not limited to--

(i) all indications provided by the Act or subordinate instrument as printed by authority, including punctuation;

(ii) reports of proceedings in any House of the Parliament;

(iii) explanatory memoranda or other documents laid before or otherwise presented to any House of the Parliament; and

(iv) reports of Royal Commissions, Parliamentary Committees, Law Reform Commissioners and Commissions, Boards of Inquiry or other similar bodies."

99. The principles governing the application of s. 35 have been exhaustively examined: see Catlow v Accident Compensation Commission [1989] HCA 43; (1989) 167 CLR 543; Mills v Meeking [1990] HCA 6; (1990) 169 CLR 214; Humphries v Poljak [1992] VicRp 58; [1992] 2 VR 129; R v Boucher [1995] VicRp 7; [1995] 1 VR 110 at 122-124. In Boucher it was held, at 122-3, that the section requires that the courts seek to ensure that an interpretation of legislation is adopted that is consistent with the purpose and object of the Act. It is not, of course, mandatory that the court refer to the extrinsic material, and as Dawson J held in Mills v Meeking, at 235, the section does not entitle the court to rewrite an Act, but merely requires the court to construe an Act in the light of its purposes.

102. Mr Beach submitted that the terms of the Act were clear and unambiguous, and the extrinsic material could not assist the court in its task. In Re Bolton; Ex Parte Beane [1987] HCA 12; (1987) 162 CLR 514 at 518, the High Court held that where words in a statute are in themselves precise and unambiguous they best declare the intention of the legislators (see, too, Thompson v Judge Byrne [1999] HCA 16; (1999) 73 ALJR 642, at 653, per Gaudron J).

105. In a recent case (Walker v In Line Couriers Pty Ltd (1999) 73 ALJR 1084, at 1085, per McHugh, Kirby and Callinan JJ), the explanatory memorandum which accompanied amendments to an Act contained statements by the Minister as to the purpose of the amendments, which statements were at odds with the words used in the amendment. The understanding expressed by the Minister could have been accommodated in the Act by reading into the Act some additional words (as taken from the memorandum). The High Court, however, re-affirmed the statements in Re Bolton; ex Parte Beane, to the effect that where extrinsic material (such as an explanatory memorandum) appears to cast doubt on the construction of words favoured by a plain reading of those words, then, "the explanatory memorandum cannot override the clear purpose of the Act as deduced from its own language".

108. As was held in Boucher, the fact that the language of the legislation is not apparently unclear or ambiguous does not preclude the court from having regard to extrinsic material, so that it might ensure that the construction to be given to the legislation accords with the purpose or object of the Act. However, as McHugh J held in Newcastle City Council v GIO [1997] HCA 53; (1997) 191 CLR 85 at 109: "When the express words of a legislative provision are reasonably capable of only one construction and neither the purpose of the provision nor any other provision in the legislation throws doubt on that construction, a court cannot ignore it and substitute a different construction because it furthers the objects of the legislation".

111. Mr Beach for the Office, submitted, that, in any event, were extrinsic material to be considered, it supported the contentions of the defendants. He referred to the explanatory memorandum that accompanied the introduction of Part 12 into the Act in 1994. That material is obviously admissible and relevant under s. 35. It is certainly of more obvious relevance under s. 35 than instruments which were created subsequently by a non-Parliamentary body, the Office of Regulator General. That explanatory memorandum made no suggestion, at all, that exclusivity of distribution licences was intended to apply, nor did the Minister make such a statement in the Second Reading Speech.

114. Mr Young submitted that the Reform Papers could qualify under sub-paragraph (b)(iv) of s.35, as akin to reports of Boards of Inquiry. The Reform Papers, were written by the Treasury Department. They represent advisory material for government, material not too dissimilar to the material under consideration in Boucher. Although I doubt that any case of such material could be justified under s. 35(b)(iv), I should not take too restrictive a view of the material to which I might make use under s. 35. Care is required, rather than some rigid approach; the critical question is whether the material helps me to discern the true intention of the legislature. In that regard, I do not abandon common sense and logical analysis when considering material said to provide assistance in that task.

117. In my opinion, having regard to the principles stated in the cases cited, the material comprising the 1993 and 1994 reform papers and the Second Reading speech (as well as the explanatory memoranda) should appropriately be considered to be relevant material under the section. I reach a similar conclusion as to a later report, published in 1995.

120. As to the range of material, described, loosely, as subordinate instruments, Mr Young submitted that subordinate instruments were expressly permitted to be used under s. 35, by virtue of the reference to them in sub-section(b)(i). I agree with Mr Beach, however, that that is a misreading of the sub-section. Read as a whole, the section, when speaking of "subordinate instrument", is considering the interpretation of such an instrument, itself, and stating that relevant extrinsic material may be used to interpret such an instrument. It is not stating that a subordinate instrument can be a relevant extrinsic item which can be used to interpret a statute. To be used by me, the instruments to which I was referred must constitute "any matter or document" relevant to the interpretation of the Act.

123. It is to be noted, too, that all of the items listed under the sub-paragraphs under s. 35(b) are items that would only have come into existence before the relevant legislation had been passed. That is some indication of the improbability that material published subsequently could provide assistance in interpreting the meaning of the earlier legislation. I do not accept that Codes, and similar instruments, brought into existence after the passage of the Act, and brought into existence by an independent body such as the Office, could provide any assistance in interpreting the meaning of the legislation, as intended by the Parliament, when Part 12 was first introduced. It could, of course, be different with regard to subsequent amendments to the original legislation, where it might be presumed that the legislature was aware of the subordinate instruments which had come into existence after passage of the original legislation, but it seems to me that, even then, great care would be required before one could be satisfied that the instruments had any value in assisting my task of interpretation, as to later amendments to the legislation.

126. Notwithstanding my reservations as to the efficacy of some of the material, I will deal with the extrinsic material at some length because it does, in my view, provide an important backdrop to the legislation, as amended from time to time, although, in the final analysis, I conclude that the interpretation of the legislation for which the plaintiff contends can not be accepted. The reading of the extrinsic material, or some portions of that material, could well explain why Citipower had understood, as it claims it did, that a distribution licence holder would have a monopoly for distribution and supply in its area. In making that observation I am not making any finding of fact as to whether, as it also claims, Citipower had been given assurances by or on behalf of government as to that issue, prior to the signing of an agreement for the sale of shares in Citipower, at the time of its privatisation. I have not heard evidence as to this, and make no finding. The plaintiff claims to have been taken by surprise at the suggestion that it did not acquire a monopoly right under the licence, but, however much Citipower and other observers may have expected or understood that a monopoly would be or was granted by the licence, I have concluded that whilst as a practical reality a licence holder may have gained a monopoly over distribution and supply within the area of its licence, that outcome was neither the intended nor the achieved result of the legislation.

131. In October 1993 the government published a paper setting out government policy for the future of the electricity supply industry. The paper was titled "A Competitive Future - Electricity". In their joint preface to the paper, the Minister for Energy and Minerals and the Treasurer spoke of Victoria "unbundling its state-based electricity supply monopoly to develop a more competitive and commercial environment", with consumers benefiting from lower prices and better service, delivered by an industry based on sound financial footings.

134. The paper asserted, at page 6, that creating competition was a key objective of the reforms. The paper noted that there were different ways in which to foster competition, but noted:

"However, the most effective form of competition is when the buyers of a firm's product have the choice to buy elsewhere, or where there is the threat of entry into the industry of new competitors. This type of choice is not available under the current vertically integrated industry structure. At the same time, it is recognised that some elements of the (Electricity Supply Industry) are natural monopolies and can only be subject to limited competition". (My emphasis.)

138. That passage introduces the critical issue that divides the parties. The plaintiff, Citipower, contends that in recognition of the fact that distribution of electricity was, and must remain, a monopoly, the government drafted the reform legislation to manifest that intention. The defendants submit that whilst the tendency for distribution to be a natural monopoly was recognised by the government and the legislature, the objective was that competition would be encouraged at all levels, including at the level of distribution, and that the legislation was drafted so that the regulation body, the Office, was empowered to grant more than one distribution licence over the same geographic area, notwithstanding the fact that to do so would tend to defeat, or to reduce, the breadth of the natural monopoly in the area of distribution. Thus, when the paper stated, at page 8, that "creating a competitive electricity market is an evolutionary process" then, according to the defendants, the government was merely acknowledging that the defeat of what might today be seen to be a natural monopoly might take time, but nonetheless drafted its legislation, and subsequently the amending legislation, to permit that evolutionary process to occur, so as to defeat the monopoly, if the opportunity arose.

141. The Reform Paper stated that, as the first stage in the evolutionary process, the government had replaced the State Electricity Commission of Victoria with three new businesses, which were to conduct generation, transmission and low voltage distribution across the State. Former employees of SECV would be transferred to the new businesses, which were to be state owned. The paper indicated that the limited additional role of Municipal Electrical Undertakings (ie. local government electricity distribution and supply bodies) in the distribution and supply of electricity would ultimately also be replaced by a limited number of distribution companies, that would cover the entire state.

144. A reading of this lengthy Paper can not lead to any confident conclusion as to whether it was intended that the natural monopoly of distribution was to be entrenched by legislation. There is no statement of such intention, in clear terms, anywhere in the document. There are, indeed, passages that suggest the contrary, ie. a desire to promote competition at all levels: for example, at page 69, where it is said that "the most effective form of competition is where buyers can choose between a number of suppliers, and where there is also the threat of new suppliers entering the market". That is consistent, the defendants contended, with the government intending that there might be more than the five privatised companies which were to become the holder of distribution licences under the legislation.

147. The evolutionary nature of the proposals, as emphasised in the paper, was stressed by the defendants. I was referred to a passage, at page 68, viz: "It is not possible to be definitive about the final structure, in terms of the optimal number and structure of generation or distribution entities, for example". On the same page, it was noted that the initial structure which would be set up would be monitored, so that market developments could be taken into account, as part of the evolutionary process.

150. However, whilst there are passages in the paper which support the contentions of the defendants as to the intention manifest in the paper concerning the proposed legislative framework, my impression on reading the Paper is that its authors assumed that distribution (what it calls the "distribution wires" business) would simply not be competitive, and, thus, it seems to have been anticipated that the legislation would recognise that fact. In reaching that conclusion I have particular regard to passages which appear at page 60-61, and at page 73.

153. At pages 60-61 the following passages appear, under a heading "The Distribution and Supply Sectors":

"6.7 The Distribution and Supply Sectors Currently, both the low voltage distribution of electricity through local networks (the distribution `wires' business) and the wholesale purchase and retail sale of electricity (the retail `supply' business) are integrated functions within local SECV Customer Service Businesses and the MEUs. The distribution `wires' business, like the transmission `wires' business, is a strong natural monopoly due to the high costs of duplicating the assets. However, the retail supply business is potentially competitive for large customers in the short to medium term, and perhaps for smaller customers in the longer term. Even small consumers could eventually gain the advantages of competition by purchasing electricity through power brokers or other participants who aggregate the market power of such small customers. If there is to be a competitive supply market, then a number of key issues need to be addressed: ø Number of participants. Competitive purchasing of electricity at the wholesale level, and competitive sale at the retail level, depend on there being a number of participants in the market. These might include regionally based integrated distribution/supply businesses, large customers, and wholesale electricity brokers. ø Open access. In the competitive sector, there should be open access to large commercial and industrial customers. In the captive market, domestic and small industrial and commercial customers will need to be protected through regulation. ø Transmission and distribution pricing. These should be fair and transparent. ø Cross-subsidies between captive and competitive market sectors. There should be no cross-subsidy on supply prices between competitive and captive market sectors. If a distribution body is also a supplier, then these functions will need to be separated, at least for accounting purposes. The distribution "wires" business is a natural monopoly, which can be conducted on a regional basis by awarding area franchises for defined regions. Benchmark or yardstick performance comparisons can then be made between them to encourage efficiency improvements. Performance comparisons are easier between franchises that are similar in size and customer composition. In determining the optimal number of distribution franchises, the Government needs to consider any economies of scale in delivering distribution services, the minimum number of franchises for effective comparison, and geographic and demographic variations. Possible options for defining distribution businesses include: ø A number of similar "pie-slice" distribution businesses. Similarity in size, customer types, load profiles and coverage of urban and rural areas allows for easier performance comparisons between businesses. It also minimises the need for equalisation payments, if cross-subsidies and uniform pricing are to continue. ø Multiple similar metropolitan distribution businesses and multiple similar rural distribution businesses. This option recognises the different supply economics of rural and metropolitan areas, more clearly exposes the cross-subsidies between rural and urban areas (but not those within the different areas), and allows for performance comparisons within the two groups. This option will require significant equalisation payments between the metropolitan and rural businesses, if cross-subsidies and uniform pricing are to continue. The development of an optimal structure for the distribution sector will need to take into account the MEUs. The overall objective should be to improve to the efficiency and responsiveness of the sector."

157. The closing paragraph, in the above extract, suggests that for distribution the primary concern was not to generate direct competition, in an area where it was not thought to be possible, but to ensure that the distribution process was efficient and responsive. The reference to the awarding of "area franchises for defined regions", as the means for dealing with the natural monopoly within the distribution wires business, seems to me to be particularly indicative of the future intentions, especially given the recognition that cross subsidies would be a continuing feature of the distribution business.

160. At page 73, under the heading "Distribution", the report stated:

"Distribution The Government is contemplating the further restructure of the distribution sector into a number of separate but similar independent regional distribution businesses. The restructure will cover the 18 SECV Customers Service Businesses across Victoria, and the 11 Municipal Electricity Undertakings (MEUs) in metropolitan Melbourne. The new businesses, together with large consumers, will be able to participate in the competitive wholesale electricity market. While the transport of electricity through local distribution networks (the distribution `wires' business) is a natural monopoly, the purchase of electricity from generators and its sale at the retail level (the retail `supply' business" is potentially competitive at least for larger customers. The Government will be investigating the advantages of introducing competition into the retail `supply' business of the distribution sector."

165. In February 1994 the Government published a second paper, titled "Stage two: A Competitive Future - Electricity". In this paper the government announced its intention to replace the three companies and the 11 municipal electricity undertakings with eight new companies, comprising five distribution companies, a grid company, a system security and wholesale market control company and a parent generating company. I was told that it was this paper which the Minister for Energy was referring to, on 6 May 1994, when he introduced the new legislation into Parliament. It was not disputed that I was entitled to have regard to this paper, pursuant to s. 35 of the Interpretation of Legislation Act.

168. In this paper it was recognised that the five distribution companies would be "regionally based" and would cover the metropolitan and rural areas of the state. It was said, at page 3, of the proposed structural changes (into the 11 companies) that it would "separate the natural monopoly elements from the potentially competitive parts of Victoria's electricity industry. This is a necessary but not sufficient condition for competition". At page 8 it was stated that:

"A competitive electricity market requires the isolation of natural monopoly components (transmission and distribution) from potentially competitive elements (generation and retailing). Generation and electricity retailing are linked by a wholesale electricity market and a retail market."

172. At page 17 the Paper discussed the range of options which had been considered for distribution, and those studies disclosed that there was a preference for the establishment of five distribution businesses - "after larger and smaller configurations were eliminated" (because they did not satisfy one or more of the criteria, being, effective competition, operational efficiency, financial viability, and business value and saleability). The authors continued, after acknowledging that cross subsidies would need to be maintained for several years, that: "Five stable, profitable and saleable distribution businesses can be created from the existing Electricity Service Victoria and MEU assets but it does require integration of the territories to balance the customers serviced in each business. In addition, asset values will adjust to reflect the different levels of profitability in each of the businesses."

175. That passage does seem to me to be an acknowledgment that there would not be competition, over the same areas, between the five businesses, but that the respective advantages and disadvantages of their assigned areas, and the relative numbers of customers in the areas, among other factors, would be reflected in cross subsidies. Had it been intended that they might compete in the same areas one would have expected that to have been stated, and for it to have been explained how that would be consistent with the proposed cross subsidy and asset valuation approach which was being adopted.

178. In the Paper the terms "equalisation" and "natural monopoly" were defined as follows:

The process of redistribution of the revenues from uniform tariffs between different regions. This usually takes into account the different costs of supply in each regions, and should reflect a fair rate of return on the assets required for a certain standard of service in each region.

An activity, usually because of high fixed costs associated with it, that cannot economically be provided by more than one market participant."

182. The assumption of there being no direct competition between distribution businesses over each other's areas was further emphasised in passages at page 19, where, under the heading "Achieving a competitive electricity industry", the Report states:

"A key Government objective is empowerment of the consumer. However, the wires businesses - transmission and local distribution lines - are natural monopoly network businesses where competition and choice in relation to transporting electricity (with minor exceptions) are not practical. System security and the pooling function are also monopolies in that the technical and commercial rules by which the system is managed need to be centrally co-ordinated. Consumer choice and demand side management can be encouraged through competition in generation and energy retailing, giving consumers an incentive to transfer their electricity consumption from times of high prices to times of low prices. This represents a significant advantage of empowering purchasers in a competitive market. The conditions required to create such a market are: * an open and competitive wholesale electricity market; * a transmission grid that provides open access on a transparent and non discriminatory basis; and * regulation to separate line and energy charges at the distribution level and requiring distribution businesses to provide access for competing retailers transporting energy to customers."

186. Mr Beach submitted that the reference to "minor exceptions" in the first paragraph, cited above, is consistent with an intention that in instances where it is practical to prevent a natural monopoly a second licence might be granted which related to the same area specified in another licence. Thus, he submitted, it would be appropriate in what he termed "greenfield' areas that such an approach might be permitted. Although the term does not appear to be employed in the legislation, Powercor, in both of its applications, adopted what it suggested was a stated view of the Office that what it called an "insert" licence could be permitted to be granted in a "greenfield" area. That latter term was described by Powercor as meaning an "area where a development is in a clear site with a defined boundary, does not result in significant stranded assets, and will result in a viable stand alone network." In its applications Powercor submitted that Docklands was a greenfields area, where little development had taken place and where the assets which presently existed were obsolete, and quite inadequate for the proposed development of the area.

189. Mr Beach submitted that the granting of a licence to Powercor for the Docklands area was a development that was within the concept of a "minor exception", as discussed in the Reform Paper, above. I have difficulty with that proposition, which gives little meaning to the word "minor", given the scope of the proposed Docklands development, and the potential precedent effect of acceptance of either of Powercor's applications.

192. The 1994 Reform Paper also stated, at page 20, that there would become two classes of retail customers, first, those whose volume of electricity supply enabled them, as non-franchise customers, to seek competitive quotes from competing retailers, or to obtain their supply wholesale, and secondly, those franchise customer who "will not be able to exercise choice and will be captive to the distribution business responsible for the area in which they are situated"(my emphasis). The distribution business would be obliged to supply these customers in its area. The distribution business was to be required to keep separate its accounts relating to the wires business and those relating to the retail sale of electricity.

197. Little assistance can be gained by reference to the Second Reading speech of the Minister that accompanied the introduction of Part 12 into the Act, by way of amendment Act No 53 of 1994. The Minister referred to the second Reform Report, cited above, and quoted large extracts from the report, including the reference to "the separation of natural monopoly elements from the potentially competitive parts of the industry". Mr Beach submitted that the extracts quoted by the Minister from the 1994 Report disclosed that notwithstanding that the 1994 Reform Report identified both transmission and distribution as natural monopolies, the Minister accepted transmission, alone, as being appropriately regarded as a natural monopoly, not distribution also.

200. Mr Young, for Citipower, submitted that to give the speech that interpretation is to misread what the Minister said, because, in context, he was plainly accepting the conclusion stated in the Report that both activities were natural monopolies. Either interpretation of the speech could be correct, but as it does not appear to me that the Minister was intending to reject any proposition stated in the Report, Mr Young's contention is more likely to be correct.

203. What may be concluded from the speech, however, is that, whilst it recognised that distribution had been, and still was, a natural monopoly no explicit statement was made, either way, as to whether it was intended, for all time, that the five distribution companies were to be free of competition from other distribution companies in their assigned areas of operation.

207. Mr Young, in his reply to the submissions of other counsel, disavowed the suggestion that the terms of the licences could be used as an aid in interpreting the legislation which was the source of power for their creation. However, in examining what he said was the scheme of the legislation, and in contending that the legislative intention was that there be only one distribution company in any defined geographic area, Mr Young made much of the terms of the distribution licence and the retail licence, although he gave greater emphasis to a series of Codes promulgated by the Office, pursuant to its power under s. 26 of the ORG Act. Mr Beach submitted that I should not have regard to the terms of the licences, at all, in order to interpret the power given to the Office under the Act. Without finally deciding the question, it seemed to me that it was useful to consider the terms of the licences, if only because it is difficult to understand the areas of dispute, and the context in which later amending legislation was passed, without understanding what were the terms of the licences.

210. The distribution licence granted the right to the licensee "to distribute electricity for supply, and to supply electricity, in the distribution area..." The terms were identical for all five companies granted distribution licences, and their distribution areas were clearly identified, and did not overlap. Section 163 of the Electricity Industry Act 1993, as introduced in 1994, provided that the Office could issue licences on such conditions as it determined. Without limiting the range of terms and conditions, a number of conditions, which might be included, were set out in s. 163(3), such as requiring the licensee to enter agreements of a kind and on such terms as the Office specified, or preventing the licensee from engaging in specified business activities, or requiring the licensee to observe industry codes as determined by the Office. As the section demonstrates, the power of the Office to set terms and conditions was extremely wide.

213. The distribution licence did not purport to state that the licensee had an exclusive right to distribute and supply electricity in the distribution area. The licence imposed an obligation to provide connection services to a retailer who wished to sell electricity to a non-franchise customer, and to do likewise for a customer, if the customer requested that it be done. The licence was not transferable (clause 23).

216. Clause 6 of the licence imposed an obligation upon the licensee to allow another distributor to make use of the equipment and facilities of the licensee so as to facilitate the distribution of electricity by the other distributor. Although this clause might merely facilitate the transfer of electricity from one distribution area to another, so that in the latter area the electricity would then and there be distributed, in my view it also contemplated the holding of more than one distribution licence in the same area. Clause 6.2 provided that:

"The licensee must ensure that it has sufficient rights in respect of all poles, trenches, conduits, communication lines and cables in the distribution area (other than those owned or controlled by another distributor licensed to distribute electricity for supply, and to supply electricity in the distribution area) to enter into an effective contract for the use thereof by another distributor pursuant to clause 6.1(b)(1)."

220. I have concluded that I would not be entitled to use the terms of the licence so as to interpret the meaning of the legislation under which the licence was granted. Such an approach to interpretation, which I am satisfied would be inappropriate in any instance, is made even more inappropriate in the present case, given the sheer breadth of the authority given to the Office under the Act as to the terms and conditions imposed in the licence. However, if I am wrong in that conclusion then, were I to have regard to the terms of the licence, I would conclude, in any event, that the contention of the plaintiff that it demonstrates that the plaintiff was to hold an exclusive right to distribute electricity in its assigned area, is not supported by a reading of the licence.

223. Mr Young submitted that the significance of the licence was that it imposed on the distributor an obligation to supply electricity to any person in the distribution area who requested it. Citipower would remain under that obligation with respect to any person in Docklands, even if Powercor obtained a licence, also, for the Docklands area. This condition meant that Citipower would either have to provide its own infrastructure in order to meet any such requests or would be forced to pay Powercor for the use of Powercor's infrastructure so as to meet its, Citipower's, obligations as to distribution under its own licence. Citipower was not in a position to pick and choose which customers it might deal with, whereas Powercor, in its application, so Mr Young submitted, was seeking to do just that, and to deal with only the "cream" of available customers.

226. The Retail Licence which was issued to each of the five distribution companies, in addition to their distribution licences, authorised the licensee to sell electricity to franchise customers "in the licensee's distribution area", and to non-franchise customers anywhere in Victoria. When first issued, the licence said nothing about there being an exclusive right of sale to franchise customers within its distribution area. Clause 4, however, imposed an obligation to sell electricity to a franchise customer who was "in the licensee's distribution area", and who requested the sale of electricity.

229. The defendants submitted that an exclusive right of sale to franchise customers was not introduced in to the retail licence of a distributor until s. 162(2B) was inserted into the Act by Act No. 56 of 1995. I will discuss that section in detail later, but, in essence, it expressly stipulated that a licence granted to a distribution company, to sell electricity to franchise customers, was to be an exclusive right of sale to those customers.

232. However, far from that amendment being the first occasion when an exclusive right of sale was granted, Mr Young submitted that there had always been that exclusive right, and, that s. 162(2B) was introduced solely because of a change in government policy which was to bring that exclusive right to an end at 31 December 2000. The Act was amended by Act No. 56 of 1995, he submitted, so as to provide that all customers could deal with any party for the purchase of electricity after 1 January 2001. It was solely for the purpose of bringing the exclusive right of sale to an end, that the Act, and the licence, had to specifically mention the exclusive right at all, Mr Young submitted. In response, the defendants dispute that suggestion, but point out that even if it was correct that, as Mr Young contended, a pre-existing exclusive right was merely being acknowledged by s. 162(2B), the exclusivity related only to sale and not to distribution of electricity.

235. The new licence which was later substituted because of amendments to the Act, re-stated its date of operation as 3 October 1994. The new licence replaced the original licence on and from 8 April 1999. The new licence expressly provided that the right of sale to all customers, both franchise and non-franchise customers, would be open to competition after 1 January 2001. Clause 4.4 provided, however, that, save for certain specified situations, a licensee "must not refuse to sell electricity to a franchise customer in relation to an electrical installation of a franchise customer that is in the licensee's distribution area". Thus, although an exclusive right of sale to franchise customers until 1 January 2001 was being acknowledged, there was a corresponding obligation to sell electricity to those customers. Once again, the plaintiff contends that Powercor is seeking to obtain a licence which would not oblige it to sell to all franchise customers who requested that it do so, and thus was seeking a licence of a different character to that created under the Act. This pointed to the conclusion, Mr Young submitted, that there was no power to grant the licence, or the variation, which the Office was proposing.

239. On the same day that Part 12 came into operation - 3 October 1994 - the following Codes took effect; The Distribution Code, the Retail Tariff Metering Code, the System Code, the Supply and Sale Code. The Tariffs and Charges Deed (the deed was subsequently replaced by the instrument, the Tariff Order) also came into effect. The terms of the distribution licence (which also took effect from 3 October 1994) required the licensee to have regard to these Codes.

242. Mr Young submitted that each of those Codes reflected the assumption that there would be but a single distribution licensee for each area, although he conceded that none of the Codes expressly said as much. The Tariff and Charges Deed (and the Tariff Order which replaced it in 1994 by an Order in Council made pursuant to s. 158A) provided for transmission fees to be paid by distribution licence holders, and the fees charged to Citipower were weighted at a higher rate than those charged to rural licence holders, such as Powercor. The charges were determined by a calculation having regard to the value of assets and of the franchise of each licence holder, and the country was subsidised by the city. Mr Young contended that the cross-subsidies were calculated on the assumption that distribution areas would be exclusively held by licensees. Counsel submitted that it would be inconsistent for there to be such a weighting in favour of rural licensees and yet for those rural licensees to be entitled to simply move in to an area covered by a city distribution licence so as to obtain a competing licence and then seek to provide distribution services to just one lucrative locale, within the broader licence area of another distributor. That is what Powercor is seeking, Mr Young submitted. It wants to obtain the cream of consumers, based in one area, Docklands, leaving the franchise "dross" in that area to the existing licence holder or, more likely, itself assuming the monopoly role as distributor throughout the Docklands area in replacement of Citipower. Mr Beach contended, however, that a close examination of the terms of the Tariff and Charges Deed (see Attachment 9, note 1, at page 49 of the Deed) demonstrated that the fees for transmission services which were charged to distributors related to the quantity of electricity which the licencees obtained, and did not relate, at all, to any suggestion that they were to have an exclusive right to distribution in their area.

245. The Tariff Deed of 3 October 1994, which had imposed a franchise fee based on "the exclusive right to service" franchise customers, was replaced by a Tariff Order which was dated June 1995. The power to make the Tariff Order was given by s. 158A, which was introduced by Act No. 110 of 1994. By virtue of s.158A(1C) the Tariff Order, although dated June 1995, was deemed to have also taken effect on 3 October 1994. Mr Young argued that the terms of the Tariff Order, as was the case with the Tariff Deed, reflected the fact that for the purpose of equalisation adjustments, it was assumed that a distributor would have exclusive rights to a distribution area. There are provisions in both the Deed and the Order which tend to support that contention.

248. Clause 8.1 of the Tariff Deed, which provided for the franchise fee, spoke of there being a "guaranteed ongoing customer base", and clause 8.2 spoke of distribution companies having "the exclusive right to service their franchise customer bases". Whether the word "service" encompassed "distribution" and "supply", as well as "sales", to franchise customers is not clear. It was also by Act No 110 of 1994 that s.163A was inserted. That section, which took effect from 20 December 1994, required that a distribution company "that supplies electricity to franchise customers" pay the franchise fee set out in the Tariff Order. That section was amended by Act No 56 of 1995 (as I will later discuss) to specify that the franchise fee related to the "exclusive" licence of a distribution company "to sell electricity to franchise customers". The Tariff Order, which, as I have said, was dated June 1995, but was deemed to have commenced operation earlier, said in its summary that: "A franchise customer will be supplied exclusively by the franchised retailer for the geographical area in which the franchise customer is located". In his written reply, Mr Young accepted that "supplies" was used in s.163A, when the section was first introduced, to mean "sale and supply", and in my opinion that is the sense in which the word "supplied", quoted above, from the Tariff Order, was also used.

251. However, even if Mr Young's contentions be correct, namely, that the Tariff Deed and Tariff Order demonstrated the assumption that a distribution company had exclusive rights to sale, to franchise customers in its licence area, I agree with Mr Beach that nothing in the Order or the Deed suggested that it must necessarily remain so. Mr Young submitted that whilst exclusive right of sale to franchise customers was to come to an end from 1 January 2001, the Tariff Order indicated that the equalisation adjustment would continue beyond that time, thus demonstrating that the equalisation was required because there was exclusivity in supply of electricity after that date, even if exclusivity in sale to franchise customers ceased, and it demonstrated, too, the improbability that the legislation was intended to maintain equalisation payments predicated on exclusive rights when that exclusivity could be removed by the grant of another distribution licence to the same area.

254. Whatever may be taken from the references in the Tariff Deed or Tariff Order to the rights of distribution companies with respect to franchise customers, nothing in their terms demonstrated an assumption of there being any exclusive rights of distribution, supply or sale to non-franchise customers. I note, again, that the application made by Powercor expressly disavows any intention that it gain any rights of sale to franchise customers before 31 December 2000.

257. The relevant legislation anticipated that Tariff Orders might be revoked (although not varied) (see s. 158, s. 158A, 158C). Should a new distribution licence be granted to an area covered by another licence, and should that create any anomalies in the franchise fee equalisation scheme, then, as Mr Beach submitted, the Office could accommodate that by a new Tariff Order.

260. In my opinion, however, even if one could make use of the terms of the Tariff Order for the purpose of interpreting the legislation under which it originates, nothing in the terms of the Tariff Order makes any statement as to a distribution company holding exclusive rights to distribution and supply in the area of its licence.

263. The main point sought to be made by Mr Young, with respect to the operation of the Tariff Deed and Tariff Order, however, related to what he said was the improbability that the equalisation payments, which they imposed on the licence holder, would have been made in favour of rural licence holders if the city licence holder did not have an exclusive right to its area as against any rural distributor who sought to intrude into the city area.

266. In his Draft Decision the Regulator General did acknowledge that Citipower would be disadvantaged by virtue of the equalisation scheme were a second licence to be granted, to Powercor. The Draft Decision addressed the question of the equalisation payments (which are known as TUOS payments) as follows (at page 44):

"The TUOS equalisation payments that are given effect through the Tariff Order are intended to implement a tax on the transmission charge that is attributable to urban customers with this tax being used to subsidise the transmission charge that is attributable to rural customers. However, the tax itself is levied on the urban distribution licensees and the subsidy flows to rural licensees, regardless of who their customers are and where they are located. The average cost to a rural licensee of procuring transmission services for a customer is therefore lower than the average cost borne by an urban licensee for the same customer. Thus, under these arrangements a rural licensee would be able to procure transmission services for Docklands customers for a lower cost than urban licensees. This unintended competitive advantage to rural distribution licensees in respect of the Docklands would have to be removed in order to ensure that all licensed distribution businesses are able to compete for the Docklands business on a competitively neutral basis. The Office will explore mechanism for achieving this outcome prior to issuing any further licences with respect to the Docklands.

270. What would be the purpose of the cross-subsidisation in favour of rural licence holders, if such poaching of customers might occur in lucrative urban areas, Mr Young submitted? The only justification for the city providing the subsidy was that the city-based licence holder had a wider, more lucrative, customer base. In the affidavit sworn by Rolf Hermann, the Manager (Regulation) for the plaintiff, deposed that the effect of the scheme was that: "the higher efficiencies and lower costs associated with delivering electricity to urban customers are not all available to the urban distribution businesses; rather they pay more than they would otherwise pay for the delivery of electricity to their urban customers, so that the rural and regional distribution businesses can charge less to their customers than would otherwise be the case. The means by which this is achieved is the "equalisation adjustment" to the transmission charges in Attachment 7 of the Tariff Order".

273. As to the Codes, it was also submitted by counsel for the defendants that they could not be referred to by me for the purpose of interpreting the scheme of the Act, or the meaning of its terms. An examination of those Codes and other instruments discloses - so Mr Young submitted - two propositions, first, that there is an assumption throughout the Codes that, at any one time, there will only ever be one distribution company holding a distribution licence over an area of land, and secondly, that because there is only one such distribution company that company has obligations imposed upon it with respect to both franchise and non franchise customers. In particular, obligations are imposed with regard to the provision throughout the whole area of street lighting, meters, and equipment etc. In other words, Mr Young submitted, it is entirely inconsistent with the scheme created by the Codes for there to be more than one distribution company, each having obligations of an identical kind imposed under a separate licence for the same area. Mr Young pointed out that the Distribution Code imposed obligations - over the whole of the area covered by the licence - for the provision of public lighting (clause 8) and for ensuring that electricity supply was not subject to interruption. The Retail Tariff Metering Code, likewise, required the distribution company to install new meters, ensure accurate measurement of usage of electricity and referred to "the" local distribution company. That Code, and also the Supply and Sale Code, which imposed obligations to provide and maintain equipment and to supply electricity up to the point of supply, and to supply meters, also demonstrated an assumption that in any area only one distribution company would be operating, so it was submitted.

276. Mr Young submitted that a distribution licensee could not "pick and choose" which customers it would seek to serve, as Powercor was purporting to do (a proposition which Mr Murdoch disavowed, submitting that the only category of customers it did not seek to gain were franchise customers, and, as to them, only because it was accepted that there was an express exclusivity of their custom given to Citipower until 1 January 2001). The distribution licence obliges the licence holder to supply electricity to those franchise customers who request it in the area, and authorises it to supply those non-franchise customers in the area who request it. It is inimical to that scheme, Mr Young submitted, for there to be a category of distribution licence where the holder is not obliged to sell, at all, to franchise customers who are in the area of the licence. Powercor and the Office are seeking to create such a licence without any statutory power for such a hybrid licence to be created, he submitted.

279. Whatever value might be gained by an examination of the Codes and other instruments, which the Office brought into effect under the legislation, it is the terms of the legislation itself to which one must primarily look in seeking to discern the intention of the legislature. It is not the understanding of the Office as to the meaning of the legislation which is of relevance.

(a) The first version of Part 12: Act No 53 of 1994

286. It is the contention on behalf of Citipower that the legislation reflects the legislative intention that there be only one distribution licence, and thus one distribution company, in each area, and that there be no overlap of areas of operation of distribution licences. Whilst not conceding that that intention is not manifest in the words used in the legislation, Mr Young accepted that there may be some uncertainty, but submitted that the intention of the legislature may be demonstrated when the legislation, as it has been amended from time to time, is examined, and when recourse is had to extrinsic material in order to assist in the task of interpreting the legislation.

289. Part 12 of the Electricity Industry Act 1993 was introduced by Act No.53 of 1994 and came into effect on 3 October 1994.

292. The five distribution corporations which were established as the first stage of the re-structuring of the industry, each held two licences, one being a distribution, supply and connection licence, and one a retail sale licence. The licences were granted pursuant to the terms of s. 161, as introduced by Act 53 of 1994. In its original terms s. 161(1) authorised the Office to issue a licence for one or more of the activities listed under sub-paragraphs (a) to (d). The activities listed under (c) were "to distribute, supply or sell electricity". The term "distributor" was defined in s. 154, to be "the holder of a licence to distribute electricity". That definition, of itself, supposed that there could be a licence limited solely to authorising the distribution of electricity, but not, also, other activities, and thus distinguishing "distribution" from "sale" of electricity. Section 154 also defined "retailer" to be "the holder of a licence to sell electricity otherwise than through the wholesale electricity market". Whether a licence to "distribute" incorporated "supply" is unclear. The word "supply" was used inconsistently throughout the Act.

295. Thus, it was recognised that a distributor with a licence to distribute (and, arguably, supply) electricity might be a different person to a retailer who was merely licensed to sell electricity, but it did not follow that a distributor might not at the same time engage in the business of a retailer, and, provided that the distributor also held a licence to sell electricity, it could do so.

298. Section 154 defined the customers as being a "franchise customer" or a "non-franchise customer". The latter was, in effect, defined to be a large user of electricity, and anyone who was not in that category was a franchise customer. The definition specified that it was the non-franchise customer (alone) who was "entitled to purchase electricity from any retailer" (my emphasis). The matter being emphasised was the entitlement of the non-franchise customer to choose which retailer it would purchase electricity from. A similar acknowledgment of freedom of choice was not made with respect to franchise customers. Section 158 empowered the Office to set tariffs for the sale of electricity to franchise customers, as well as to set charges for connection to and use of "any" distribution system, and with respect to "the" transmission system. Clearly it was intended that there be only one transmission system, but more than one distribution system was assumed (and, of course, there were to be five established with the passage of the Act).

301. Notwithstanding the indication in the second Reform Paper that franchise customers would not have freedom of choice as to the retailer from whom they could purchase electricity (they were to be bound to use the distribution company licensed for their area), Part 12 did not expressly or clearly state that proposition. s. 169(1) provided that a distribution company might give notice of the terms and conditions, and tariffs, on which it "supplies or sells" (my emphasis) electricity to franchise customers. s. 169(4) provided, in effect, that notwithstanding that it had to give notice of its tariffs, generally, for "supply or sale" to franchise customers, it might enter a written contract with a franchise customer which specified different terms and conditions for the "supply and sale" (my emphasis) of electricity.

304. In order to sell electricity a distribution company would have to be licensed to do so. s. 159(1) provided:

(1) A person must not engage in the generation of electricity for supply or sale or the transmission, distribution, supply or sale of electricity unless the person -

(a) is the holder of a licence authorising the relevant activity; or

(b) is exempted from the requirement to obtain a licence in respect of the relevant activity.

(3) The penalty upon conviction for an offence against sub-section (1) is a penalty of not more than 1000 penalty units and not more than 100 penalty units for each day after the day on which a notice of contravention of sub-section (1) is served on the person by the Office.

* * * * *

(6) This section does not prohibit the transmission, distribution or supply of electricity by and for the use of the Public Transport Corporation.

311. The section, thus, prohibited a person from engaging in the "transmission, distribution, supply or sale" of electricity unless the holder of a licence "authorising the relevant activity". A licence granted to a distribution company under s. 161(1)(c) "to distribute, supply or sell electricity" would have to expressly authorise all aspects, and not only the distribution and supply aspects, if the distribution company was to engage in retail sales.

314. Counsel for the defendants submitted that Part 12, when introduced, did not give an exclusive right to a distribution company to sell electricity to franchise customers, and that such exclusive right was only granted by a later amendment (in Act No.56 of 1995). Thus, so it was submitted, it was even less likely that Part 12 was intending to grant exclusive rights to distribute electricity, because when exclusive rights were intended to be granted the Parliament expressly said so, as it did in Act 56 of 1995, and when it did it confined itself to granting exclusive rights to sell, not extending exclusivity to the distribution and supply of electricity, and further confined the exclusive right by permitting it to apply only to franchise customers.

317. I will examine the terms of the, later, amending legislation shortly, but in my opinion the terms of Part 12 as first introduced, whilst by no means clear, are consistent with the intended scheme being that a distribution company had the exclusive right to sell electricity to franchise customers but that non-franchise customers could purchase electricity from any retailer, with the distribution company, itself, being entitled to sell to a non-franchise customer should the customer so choose (and if the distribution company also held a retail licence). I agree, therefore, that the legislation, without saying so in very clear terms, did create an exclusive right for a distribution company to sell electricity to franchise customers who resided within the boundaries of its licence. That, of course, does not demonstrate that a similar exclusive right to distribute electricity (or "to distribute, supply and connect", to use the terms of the distribution licence) was also recognised by the Act. Mr Young contended, however, that if there was, at least, an exclusive right of sale to franchise customers that was coupled with obligations, all of this being part of a scheme of legislation which was predicated on there being, in fact, an exclusive right of distribution, also, in a distribution area.

320. Mr Young submitted that not only did the distribution company have the exclusive right to sell to franchise customers, it had the obligation to do so, if requested. He submitted that it was that very obligation which Powercor was seeking to avoid in its applications, because it sought a licence to perform only some of the responsibilities which would be obliged to be undertaken by a distribution licence holder, that factor demonstrating that the Office was intending to grant a species of distribution licence which did not exist.

323. Whilst there is no doubt that the terms of the licence did expressly impose an obligation to sell to franchise customers, I do not consider that the Act, itself, employed express terms so as to require that the distribution company meet that obligation. The wide range of terms and conditions which s. 163 authorised the Office to attach to a licence might, of course, entitle the Office, in its own discretion, to impose such a condition. One possible clause in the legislation which might have permitted the imposition of such a condition in the licence was s. 163(3)(b), which related to a condition "requiring the licensee to enter into agreements on specified terms or on terms of a specified type". That, however, was a provision not intended to compel the licensee to trade with particular people, in my opinion, so much as to trade on particular terms. The terms of s. 169(1), which enabled the distribution company to give notice of the tariffs and terms and conditions upon which it "supplies and sells" electricity, might be taken to pre-suppose that it necessarily will sell to franchise customers (and do so exclusively), rather than that it would merely be competing for their custom, but such an assertion of exclusivity is not explicitly stated. The right to sell electricity is governed by s. 158, which enables the Office to control the price which might be charged to customers.

326. Despite the vagueness, or sparseness, of some of the provisions of Part 12, I have concluded that it was the intended effect of s. 169(1) that it stipulate that it was only from a distribution company that the franchise customers could purchase electricity, and only on conditions and terms specified by the company either in accordance with any conditions of its licence, or else (pursuant to s. 169(4)) on terms and conditions negotiated by a contract in writing with a franchise customer. That was certainly what the second Reform Paper had stated to be the government intention. The section did not, however, clearly spell out those propositions. The assumption, rather than the explicit statement in s. 169(1), was that there would only be one distribution company which would exercise that right to sell to franchise customers, that being a distribution company which had a licence covering the area in which the customer was located.

329. What can be seen, however, is that save for the possible effect of s. 157 (to which I will later return) the terms in which Part 12 was first introduced do not, therefore, provide any clear guidance as to whether it was intended that a distribution licence would provide an exclusive right to provide distribution services in the area over which the licence extended. The extrinsic material to which I have referred may well demonstrate that at the time of the reports, and of the Minister's speech, it was expected that the natural monopoly would continue, but I can not draw a conclusion either from the legislation or from the extrinsic material, that it was intended that the legislation was to enshrine that monopoly, so that in no circumstances could a second licence be granted to distribute electricity in an area which also covered by another licence. Mr Young contended that the clearest indication that such was the intention of the Legislature might be found in the terms of s. 157.

332. The objectives of the Office in administering the Act were set out in s. 157, which has not been subsequently amended. Section 162 (1) provided that the Office may grant or refuse an application for the issue of a licence "for any reason it considers appropriate, having regard to the objectives specified in section 157". That section reads:

(a) to promote competition in the generation, supply and sale of electricity;

(b) to ensure the maintenance of an efficient and economic system for the generation, transmission, distribution, supply and sale of electricity;

(c) to protect the interests of consumers with respect to electricity prices and the safety, reliability and quality of electricity supply;

(d) to facilitate the maintenance of a financially viable electricity supply industry."

341. Mr Young submitted that it was obviously the deliberate intention of the legislature to exclude "distribution" from the `promotion of competition' objective in paragraph (a), but to include it in paragraph (b). Thus, he submitted, it followed that it was not an objective to promote competition in that part of the industry, being distribution. Since the Office was justifying its intended decision to grant a new licence, in part at least, on grounds of competition, then, Mr Young contended, it is pursuing an objective to which it should not have regard.

344. As I understood his argument, Mr Murdoch, for Powercor, (and also Mr Beach, I believe) submitted that the word "supply" which appeared in paragraph 157(a), above, should be understood to embrace both distribution and transmission, because what was there under discussion was the concept, broadly, of the electricity supply industry. Electricity, so it was argued, would neither be transmitted nor distributed, without, at the same time, it being "supplied". If that was their contention then I reject it, because it seems to me to make no sense of the deliberate way in which the draftsperson has used words, and also omitted their use, throughout the section.

347. However, whilst I accept that meaning should be given to the omission of the word "distribution" in s. 157(a), and that it must be taken, therefore, that it is not an objective that such competition be promoted, it does not follow that it would be improper for the Office to have regard to the capacity for, or desirability of, competition, with respect to the distribution business, which might flow from its decision. A positive objective to foster competition in other areas of activity in the industry (where, perhaps, competition is more readily fostered than in the distribution field), does not constitute a prohibition of the encouragement or acceptance of competition in the distribution field, too. Indeed, as Mr Beach pointed out, s. 157 only requires that the Office have regard to those objectives, not that all, or any of them, must be promoted by their decision. Section 162(1) provides that in granting or refusing an application the Office may decide "for any reasons it considers appropriate", providing it has regard to the objectives.

350. Furthermore, the objectives set by s. 157 must be read in context with those objectives set out in Office of Regulator-General Act. The following provisions are relevant:

(a) establish the Office of the Regulator-General; and

(b) create an economic regulatory framework for regulated industries which promotes and safeguards competition and fair and efficient market conduct or, in the absence of a competitive market, which promotes the simulation of competitive market conduct and the prevention of the misuse of monopoly power."

"4. Interpretation and application of Act and statements of government policy

(1) Subject to sub-section (2), if there is any inconsistency between this Act and any other Act, the provisions of this Act prevail.

(2) If the Office considers that there is a conflict between the objectives specified in or under this Act and the objectives specified in the relevant legislation under which a regulated industry operates, the Office must perform its functions and exercise its powers in such a manner as the Office considers best achieves the objectives specified in the relevant legislation."

(1) In performing its functions and exercising its powers the Office has the following objectives--

(a) to promote competitive market conduct;

(b) to prevent misuse of monopoly or market power;

(c) to facilitate entry into the relevant market;

(d) to facilitate efficiency in regulated industries;

(e) to ensure that users and consumers benefit from competition and efficiency.

(2) Without derogating from sub-section (1), the Office must also perform its functions and exercise its powers in such a manner as the Office considers best achieves any objectives specified in the relevant legislation under which a regulated industry operates."

"26. Other regulatory powers (1) The Office may exercise such powers (including the power to make determinations for or with respect to - (a) Standards and conditions of service and supply; (b) licensing; (c) market conduct; (d) other economic regulatory matters - as may be conferred on the Office by the relevant legislation under which a regulated industry operates or in an Order in Council made under section (3(2) or under section 158A of the Electricity Industry Act 1993. (2) In making a determination under this section, the Office must have regard to - (a) any factors specified in the relevant legislation; * * * * * * * * * (c) any other factors that the Office considers relevant. (3) This section is subject to anything to the contrary in the relevant legislation or an Order in Council under section 3(2) or under section 158A of the Electricity Industry Act 1993."

366. Those provisions are not inconsistent with the provisions of s. 157, insofar as they relate to the question of competition in the distribution business. It might be that an objective to prevent misuse of monopoly power, as mentioned in sections 1 and 7, would be consistent with the contentions of Mr Young that Parliament intended that distribution remain a natural monopoly, but, at the same time, the objectives in both Acts would not be inconsistent with the Office being entitled to have regard to the effect on promotion of competition in the distribution business, should a licence be granted. Nor would facilitating such competition be inconsistent with the objectives of either Act. There remains no prohibition manifest in the objectives provisions of either Act relating to the question of competition in the distribution business.

369. In s. 4 the use of words "If the Office considers. . ." and "in such a manner as the office considers best achieves the objectives specified in the relevant legislation", serve to emphasise just how unrestricted is the authority of the Office. That is further emphasised by s. 11 of the ORG Act which provides that the Office is not subject to the direction or control of the Minister in respect of any determination, report or inquiry, and it is again apparent in the terms of s. 26(2)(c).

372. Mr Beach stressed that it is the existence of power, not its exercise that is in issue in these proceedings, and that no decision had in fact been made by the Office. I accept that cautionary note, but whilst the Draft Decision of the Office is only that, it is arguable, having regard to its terms, that the Office is not merely recognising that one result of its intended decision would be to increase competition in the distribution field, but is actually pursuing or promoting that objective. The Draft Decision, however, is couched in terms of a wider objective - economic efficiency - and competition within the distribution field is just an aspect of achieving that broader goal (which is said to produce benefits to consumers).

375. Mr Beach further submitted that the word used in s. 157(a) is "promote" competition. Thus, the section is not speaking about what might be "permitted", in contrast to what might be promoted. In other words, even if, as the plaintiff contends, there was an express or implied prohibition against the Office promoting competition between holders of distribution licences, it does not follow that a decision which merely "permitted" that result, as a by-product of meeting express objectives set out in s. 157, would be beyond power, even if the contentions of the plaintiff were correct that the "promotion" of competition among distributions companies was prohibited.

378. Mr Beach submitted that a licence with respect to Docklands might be granted in pursuit of the objectives set out in s. 157(b)(c)or (d), so that even if one of the effects of pursuing those objectives was the promotion of competition within the distribution field, that would not mean that it was a decision made outside the powers granted to the Office. He noted the breadth of power given to the Office, and the width of factors which it might consider. I agree with those submissions. Furthermore, in my opinion, even if the Office had as one of its objectives the promotion of competition within the distribution field, that would also not constitute an abuse of its power if, provided when making its decision, it had had regard to the objectives set out in the Acts and was not otherwise acting contrary to its statutory obligations (or, for that matter, contrary to any relevant procedural fairness principles).

382. In 1995 the Act was amended by Act No. 56 of 1995. There were a number of significant changes then made to the terms of the Act. In the first place, s. 161 was amended. The section had provided that a licence could be issued "to distribute, supply or sell electricity", but the amending Act separated those concepts, thus, now identifying, in paragraph (c) a licence to "distribute or supply" electricity, and distinguishing it from (ca), which related to a licence "to sell electricity". At the same time, s. 162(2B) was introduced, and, also, significant amendments were made to s. 163A (which had been inserted by amendment Act No. 110 of 1994).

385. Section 161 was amended by Act No.56 of 1995, to read as follows:

(1) A person may apply to the Office for the issue of a licence authorising such one or more of the following activities as are specified in the licence -

(a) to generate electricity for supply or sale;

(b) to transmit electricity;

(c) to distribute or supply electricity;

(ca) to sell electricity;

(d) to operate and administer a market for wholesale trading in electricity.

(2) An application must be in a form approved by the Office and accompanied by such documents as may be determined by the Office.

(3) An application must be accompanied by the application fee (if any) fixed by the Office.

(4) This section is deemed to have been enacted as amended by section 28(1) of the Electricity Industry (Amendment) Act 1995."

392. The changes made to s. 161(1)(c) and by the introduction of (ca) are significant, firstly, because, when read with s. 157, in particular, as to the omission of the word "distribution" in s. 157(a), and with s. 162(2B), it is seen that the provisions of s. 161(1) recognise, or at least make clear, that a licence might be granted solely for a right to sell electricity, although the licence holder is not also a body licensed to distribute or supply electricity. Mr Young submitted, that the need to separate sale from the concepts of "distribution" and "supply", in that way, arose because the exclusive right to sell to franchise customers was to be declared to end at 31 December 2000. The exclusive right of distribution and supply within its licence area which had existed (and which continued), Mr Young submitted, was not affected by the changes made in this amending legislation.

395. The definitions in the Act do not offer much assistance as to the meaning of "distribution". There is the following definition:

"'distribution company' means - (a) a company to which a licence to distribute electricity was issued under Part 12 on 3 October 1994, if the company continues to hold such a licence; (b) a person who is the holder of a licence to distribute electricity issued under Part 12, being a person declared by Order of the Governor in Council published in the Government Gazette to be a distribution company for the purposes of this Act."

399. Mr Young submitted that paragraph (a) of that definition plainly demonstrated that it was only the five original distribution companies which were expected to be distribution companies thereafter, and paragraph (b) was necessary merely to provide for the situation where one of the original distribution companies might cease business and need to be replaced. Yet as Mr Murdoch, for Powercor, pointed out, in reply, a similar form of definition was employed for the term "generation company", and, on all sides, it is agreed that the legislation, and the reform papers, had always spoken of there being competition among licence holders engaged in the generation activity. Furthermore, the definition of "transmission company" also provides for the possibility of there being additional companies that might hold such a licence, apart from the single transmission company which was originally licensed to cover the entire State. (I should note, for completeness, that the definition of "distribution company", in paragraph (a), above, refers to, and identifies the five licence holders as at the commencement date of Part 12, namely 3 October 1994, whereas the definition for "generation company" refers to the date 31 January 1995. Counsel did not discuss the significance of the latter date, and I am unsure why that date may have been chosen.)

(1) The Governor in Council may by Order in Council published in the Government Gazette exempt a person from the requirement to obtain a licence in respect of the activity specified in the Order in Council.

(2) An exemption may be of general or specific application.

(3) An exemption is subject to such terms, conditions and limitations as are specified in the Order in Council".

The Governor in Council could therefore exempt a person from the requirement that he hold a licence, at all, a provision at least consistent with the possibility of there being more than the original distribution companies later engaged in the distribution business.

410. Mr Young submitted that s. 157 demonstrated that distribution and supply were intended to be kept free from competition, along with transmission. Whilst it may not have been expressly spelt out, that was an assumption which is apparent not only in the legislation but throughout the Codes and the licences, Mr Young submitted.

413. As I earlier noted, counsel for the defendants contended that the expression "supply and sale" in s. 157(a) could not be regarded as excluding distribution, because the expression "supply" was used very loosely throughout the Act. The expression "supply and sale" was used in s. 157(a), whereas the term "distribute or supply" was used in s. 161(c). In the latter case, Mr Beach submitted, "supply" was merely used as a synonym for "distribute", or else it was used so loosely as to include distribution, transmission, and connection.

416. I am unable to gain much assistance from s. 161 as to the intended meanings of the word "supply", where it variously appears. I reiterate I that am not persuaded that it has a meaning in s. 157(a) that encompasses "distribution", as suggested by counsel for the defendant. I agree with Mr Young, that the very fact that the words "supply and sale" are used both in s. 157(a) and (b), and in clear distinction to "transmission" and "distribution", can only mean that in that context "supply and sale" is not synonymous with "distribution or supply", as those terms are used in s. 161(1)(c).

419. The legislation does not provide any clear assistance in choosing between the competing contentions as to the significance of the changes introduced by Act No. 56 of 1995. Certainly, the definition of "distribution company", by its very particular reference to the original five companies, appears to assume their continued existence, but it seems to me that it by no means constitutes a statement that they should thereafter remain the only distribution companies, nor does it say anything as to the exclusivity of their operation in the distribution areas in which they were originally licensed.

422. For reasons elsewhere discussed, the fact that Parliament by its choice of words in s. 157 must be taken to have intended that competition not be promoted between distribution licence holders does not lead to the conclusion that it would be beyond power to grant a further licence if that was one effect of so doing.

425. The "distribution" function was to be kept free from the promotion of competition, Mr Young contended, because it is a costly function which required the provision of a wires infrastructure which was available to all residents in the area of the licence, all of whom could demand that they be connected and supplied from the distribution system provided by the licensed company. Non-franchise customers had an entitlement to require, if they chose, that the actual sale of electricity be provided to them by the distribution company for their area (which could have done so because it also held a retail sales licence), but non-franchise customers could also purchase electricity from any retailer, including another distribution company. In the event that a non-franchise customer purchased electricity from a distribution company other than its local area company then that vendor company would have to pay a fee to the distribution company for the local area of the purchaser, in order to use the distribution facilities in that area. That was the scheme of the Act, Mr Young submitted, a logical one because the high cost of providing distribution infrastructure meant that distribution was a natural monopoly in any area where a distribution licence already existed.

428. Section 162 (2B) was also significant, when introduced by Act No. 56 of 1995. The amended section read:

(1) Subject to sub-sections (2), (2A) and (2B), the Office may grant or refuse an application for the issue of a licence for any reason it considers appropriate, having regard to the objectives specified in section 157.

(2) The Office must not grant an application for the issue of a licence unless the Office is satisfied that -

(a) subject to sub-section (2A), in the case of an applicant for a licence to sell electricity, the applicant is financially viable; and

(b) subject to sub-section (2AAA), the applicant has the technical capacity to comply with the conditions of the licence;

* * * * *

(d) in the case of an application for a licence to generate electricity for supply or sale or a licence to distribute or supply electricity, the applicant is a company incorporated under the Corporations Law of Victoria or a statutory authority or a corporation all the shares in which are held by, or on behalf of, the State or by a statutory authority.

(2A) The Office does not have to be satisfied as to the matter specified in sub-section (2)(a) if the applicant is applying for a licence, which includes a condition requiring compliance with the pool rules, and the pool rules include prudential requirements.

(2AAA) The Office does not have to be satisfied as to the applicant's technical capacity to comply with the conditions of the licence at the time it is issued if -

(a) the activities specified in the licence are not likely to be commenced to be carried out within the next following 12 months; and

(b) the application is granted subject to such conditions as are determined by the Office relating to further approval of the applicant's technical capacity or approval of future facilities necessary for the carrying out of the activities.

(2AA) The Office does not have to be satisfied as to the matter specified in sub-section (2)(d) if, having regard to the conditions to which the licence to be granted to the applicant will be subject, the Minister so approves at the request of the Office.

(2B) If the Office has issued a licence authorising a distribution company to sell electricity to franchise customers, the Office must not issue a licence to another applicant authorising the sale of electricity to those franchise customers unless the Minister and the licensed distribution company have consented to the issue of the licence.

(3) The Office must publish a notice in a daily newspaper generally circulating in Victoria -

(a) specifying that an application for a licence in respect of the relevant activity has been lodged with the Office by the person specified in the notice; and

(b) inviting interested persons to make submissions to the Office in respect of the application within the period and in the manner specified in the notice.

(4) Subject to this section and any requirements specified in regulations made for the purposes of this section under section 92, the Office may determine the procedures that are to apply in respect of the issue of licences.

(5) The Office must notify an applicant in writing of its decision to grant or refuse to grant the application and, in the case of a decision to refuse to grant the application, of the reasons for its decision.

435. When s. 162 was amended by Act No 56 of 1995, sub-section 2(c) was repealed, and 2(d) was inserted, as was (2B). The subsection 2(c) had been inserted by Act No 53 of 1994 and had required that the Office not grant a licence unless it was satisfied that "the grant of the licence is not inconsistent with any statement of government policy declared under the Office of the Regulator General Act 1994". By the same amending Act, 56 of 1995, s. 10 of the ORG Act was repealed, along with some other provisions which had together provided for the declaring of certain public statements to constitute statements of government policy. A savings clause, s. 9A, was inserted, which provided that any statement of government policy made to that date continued to have effect. These provisions and their repeal, may not be a matter of any significance in this case, however, because for a statement to be what s. 10 defined as a "statement of government policy" it was necessary that the Governor in Council had declared the statement to be such. It was not suggested to me that the reform papers or any other material to which I was referred had been declared to be statements of government policy. Perhaps, at the highest, one might conclude that after Act 56 of 1995 the Office was given even greater freedom to decide for itself the appropriateness of any grant or variation of a licence than had already been the case.

438. As to the effect of s. 162(2B), Mr Beach contended that for the first time a notion of exclusivity entered into the legislation, but it was confined to a distribution company's licence to sell electricity and was confined to the situation of franchise customers. Mr Young contended, however, that the reason the amendments did not deal with a distribution licence was because such a licence to distribute and supply was already understood to be exclusive, as was the entitlement of a distribution company to make sales to franchise customers resident in its area. It had become necessary for there to be a statement referring to the exclusivity of sales, because that exclusivity was to come to an end on 31 December 2000.

441. By s. 2 and s. 39 of Act No.56 of 1995, s. 162(2B) was declared to be repealed, such repeal to take effect only as from 1 January 2001. Mr Beach submitted that sub-s.(2B) demonstrated that when Parliament wanted to create an exclusive right under a licence it expressly did so, and it did not do so with respect to distribution licences.

444. Before examining further the arguments as to the purpose and meaning of s. 162(2B) I need to refer to s. 163 and 163A.

447. Section 163, which allows licences to be issued subject to conditions, and which was introduced with Act No 53 of 1994, and remained, thereafter, unamended, says nothing about exclusivity.

(1) A licence is to be issued for such term (if any) as is determined by the Office and is specified in the licence.

(2) A licence is subject to such conditions as are determined by the Office.

(2A) If a licence is issued to 2 or more persons for the purpose of the carrying on by those persons of the activities authorised by the licence in partnership or as an unincorporated joint venture, the licence may include conditions relating to the carrying on of those activities in that manner.

(3) Without limiting the generality of sub-section (2) or (2A), the conditions may include provisions -

(a) requiring the licensee to pay specified fees and charges in respect of the licence to the Office;

(b) requiring the licensee to enter into agreements on specified terms or on terms of a specified type;

(c) requiring the licensee to observe specified industry codes and specified pool rules with such modifications or exemptions as may be determined by the Office;

(d) requiring the licensee to maintain specified accounting records and to prepare accounts according to specified principles;

(da) specifying requirements about the ownership of real or personal property used in or in connection with the carrying on of the activities authorised by the licence;

(e) preventing the licensee from engaging in or undertaking specified business activities;

(f) specifying methods or principles to be applied by the licensee in determining prices or charges;

(g) specifying methods or principles to be applied in the conduct of activities authorised by the licence;

(h) specifying procedures for variation or revocation of the licence;

(ha) specifying procedures for variation of the conditions by the Treasurer;

(i) specifying the procedures to apply if an administrator is appointed under section 166;

(j) requiring the licensee to provide, in the manner and form determined by the Office, such information as the Office may from time to time require;

(k) requiring the licensee to develop, issue and comply with customer-related standards, procedures, policies and practices (including with respect to the payment of compensation to customers).

(4) For the purposes of sub-section (3)(a) the fees and charges to be specified in respect of a licence are to be determined by the Minister having regard to the proportion of the total costs of the Office that are incurred in the administration of this Part.

(5) If the Office -

(a) issues a single licence authorising each of the activities referred to in section 161(1)(a) and (c); or

(b) issues to the same person separate licences which together authorise each of those activities; or

(c) approves the transfer of a licence as a result of which the same person holds separate licences which together authorise each of those activities -

the licence, or each such licence, must contain a condition prohibiting the person from having an entitlement -

(d) to generating capacity within the meaning of Part 13 of more than 30 megawatts derived from facilities which are not co-generation facilities; and

(e) to generating capacity within the meaning of Part 13 of more than 200 megawatts derived from facilities of any kind.

(6) If a licence is subject to conditions of a kind referred to in sub-section (3)(c), the Office -

(a) may, in accordance with procedures specified by the Office, amend the specified industry codes or specified pool rules, or a document referred to in such a code or rule, for the purposes of their application under the licence;

(b) may resolve, or seek to resolve, disputes between the licensee and any other person relating to the specified industry codes or specified pool rules, or a document referred to in such a code or rule, as they apply under the licence.

(7) If the Office amends an industry code or the pool rules or a document referred to in a code or the rules under sub-section (6), the Office may at the same time, in accordance with procedures specified by the Office, amend that code or those rules or that document for the purposes of their application otherwise than under the licence."

457. Sub-section (5) contemplates the situation of one company being licensed to engage in activities of generation of electricity or of distribution or supply of electricity, either by virtue of two separate licences or a single licence. In also contemplating the transfer of a licence from one licence holder to another the sub-section does not refer to the area over which the licence operates. Perhaps, little can be taken from the absence of reference to the area of operation of the licence. Were it contemplated that more than one person might hold a licence to the same area, however, it might have been expected that that situation would have been expressly addressed. Sub-sections (2A) and (5) deal with situations which are likely to be infrequent occurrences and, given what I believe to have been the expectation that distribution licences would as a matter of fact have exclusive operation, it might have been expected that some provision would have been made for the unlikely but possible situation of there being overlapping licences covering the same area.

460. Section 163A was first introduced by Act No 110 of 1994. It provided for payment of a franchise fee by a company which was or had been a distribution company and which supplied electricity to franchise customers.

463. When s. 163A was amended by Act No 56 of 1995 the franchise fee was related to the sale of electricity to franchise customers, not to "supply", and for the first time reference was made to there being "an exclusive licence" to sell to franchise customers. The amended section read as follows (I have emphasised the relevant words):

(1) A distribution company that holds, or has held, an exclusive licence under this Part authorising it to sell electricity to franchise customers must pay to the Treasurer, in respect of each financial year during which it holds, or held, such a licence the impost determined in respect of that year by Order of the Governor in Council, on the recommendation of the Treasurer, applying to that company and published in the Government Gazette-

(a) if the licence is issued before 30 June 1996 -

(i) before 30 June 1995, in the case of the impost in respect of the financial year ending on that date; and

(ii) before 30 June 1996, in the case of the impost in respect of each year ending on 30 June in the period beginning on 30 June 1996 and ending on 30 June 2001; and

(b) if the licence is issued on or after 30 June 1996, before the end of the first year of the term of the licence.

(2) The Treasurer, in recommending the amount of an impost for each financial year payable by a distribution company, must be satisfied that the amount reasonably represents the amount by which the income of the company derived from the sale of electricity to franchise customers in that year is likely to exceed the sum of -

(a) the costs of deriving the income; and

(b) taxes payable in deriving that income; and

(c) an amount determined by the Treasurer to be a reasonable return on the capital of the company used in deriving that income -

having regard to -

(d) any relevant Order in force under section 158A; and

(e) the value of property and rights vested in the company under Parts 10 and 11; and

(f) the amount of liabilities that became liabilities of the company under Parts 10 and 11; and

(g) the likely number of franchise customers of the company in that financial year; and

(h) such other matters as the Treasurer determines after consultation with the company.

(3) The impost in respect of a financial year is payable at such times and in such manner as are determined in the Order.

(3) For the purposes of this section, a distribution company has an exclusive licence authorising the sale of electricity to franchise customers if that licence is the only licence in force under this Part authorising the sale of electricity to those customers."

470. Mr Young submitted that although there was no express statement in the legislation that a distribution licence gave an exclusive right to distribution in an area, this new section pre-supposed that that was the case.

473. Mr Young submitted that although there had always been an exclusive right to sell to franchise customers (as he contended was the case) and had also been an exclusive right to distribute in the distribution area, it only became necessary to refer to the exclusive right of sale because s. 2 and s. 39 of Act 56 of 1995 provided that as from 1 January 2001 the identification and distinctions between franchise and non-franchise customers were to be abolished, so that from that date the exclusive right of sale to franchise customers was to be removed. From 1 January 2001 the repeal of s. 163A was to take effect by virtue of the provisions of Act No. 56 of 1995. Thus, the section was actually a "sunset clause", defining and confining the period for which the franchise fee would remain liable to be paid, and the amendments limited the period for which an exclusive right to sell to franchise customers would continue to apply.

476. The defendants submitted that, in effect, what s. 163A did at this time was to provide, for the first time, for an exclusive right to sell to franchise customers, thereby acknowledging, by exclusion of any reference to distribution and/or supply, that there was not any continuing, nor had there been any past, exclusive right of distribution and/or supply in the distribution areas. Section 163A was restricted to sale of electricity and, furthermore, only applied prospectively. Also, it only applied to franchise customers, and only as to them until 31 December 2000. The use of the phrase "supplies electricity to franchise customers" which appeared, originally, in s. 163A arguably could be taken as being a compendious reference to the compendious licence provision referred to in s. 161, at that time, namely, under s. 161(1)(c) "to distribute, supply or sell electricity" but Mr Young submitted that although s. 163A when first introduced by Act No. 53 of 1994 related the franchise fees to "supply" by a distribution company, that word was used, at that time, in the sense of "supplies and sells" not in the sense of "distributes and supplies". Thus, it had always been the case that the franchise fee related to retail sales. The question of the distribution licence was not affected by s. 163A, he submitted; it remained as it had always been, Mr Young submitted, an exclusive monopoly right to the licence holder in each area. Prior to this amendment it had not been necessary to single out, or to spell out, that sales to franchise customers were exclusive rights, because sales, distribution and supply to franchise customers were all exclusive rights held by the distribution companies. Had it not been for the necessity to specify the sunset clause concerning exclusivity of sales to franchise customers, then they would not have been mentioned in Act 56 of 1995, Mr Young submitted.

479. Mr Young referred me to extrinsic material relevant, specifically, to the introduction of the Bill for Act No.56 of 1995. The first of these was yet another Reform Paper, dated December 1994 and titled "A Competitive Future for Electricity - A summary of reforms" written, again, by the Office of State Owned Enterprises, which foreshadowed that the five corporatised distribution companies were to become privatised in 1995. Although this document was not referred to in the Hansard debate I consider that it is relevant for my consideration under s. 35 of the Interpretation of Legislation Act. The paper, at pp.10-11, said that the five companies had separated their "wires" business from their business of selling electricity, and stated that: "The wires function . . . has been separated from the retail function for regulatory and accounting purposes. The wires function is effectively a local monopoly subject to independent regulation. Customers who initially do not have a choice of retailer or direct access to the competitive market are termed franchise customers". At page 37, the Paper said that: "The wires function is regarded as a local monopoly and will remain subject to regulation by ORG. The retail function will be progressively opened to competition over the next five years" At page 38, it asserted that the wires business required the distribution company to connect all customers or licensed retailers to its network, and, at p.40, that the government had set prices which it could charge for connection and usage in order to ensure that the distribution company had a fair return on its capital. That objective would be thwarted if customers were simply removed from its captive area by virtue of permitting another distribution company to move into the same area, Mr Young submitted. At page 65, the report spoke of the wires business as being "a regulated geographic monopoly business separate from the competitive retail function" of the distribution company. Those and earlier passages do suggest that it was assumed that the wires business would remain a monopoly, but it seems to me that the paper says nothing about whether that was regarded as necessarily being so, or being desirably so. Although these passages might well explain why Citipower might have assumed that it was in fact going to have a distribution monopoly in its area, these passages do not preclude the legislation actually providing for, and being intended to provide for, the possibility that that might not remain so.

482. In my opinion, neither in its original terms nor as amended, does s. 163A demonstrate a legislative intention that distribution and/or supply of electricity to franchise customers was to continue to be a monopoly entitlement of the distribution company which first gained a licence to any area. The section is simply silent as to that question.

486. The introduction of s. 163AAA was submitted by Mr Young to be a further pointer to the fact that the scheme of the Act was that there be no competitors for distribution in an area identified in any distribution licence. This section assumes that there could be only one distribution company in any given area, Mr Young argued.

163AAA. Condition in distribution company licence

(1) Without limiting the generality of section 163, the conditions to which a licence to distribute or supply electricity is subject may include a requirement that, in certain circumstances, the licensee, on terms and conditions approved by the Office, supply and sell electricity to non-franchise customers to whom electricity is supplied under another licence (whether held by that licensee or another licensee).

(2) In approving the terms and conditions of a requirement referred to in sub-section (1), the Office must have regard to the risks and costs associated with the requirement.

(3) A requirement referred to in sub-section (1) does not apply so as to require the licensee to supply and sell electricity -

(a) outside the distribution area within the meaning of the licensee's licence; or

(b) to a non-franchise customer to whom electricity is supplied under another licence if the non-franchise customer elects, in writing given to the holder of that other licence, not to be a non-franchise customer for the purposes of sub-section (1).

(4) If the conditions to which a licence of a licensee is subject include a requirement referred to in sub-section (1), the licensee is deemed to be the holder of a licence to sell electricity to the extent necessary to comply with the requirement.

(5) The obligation of the holder of a licence ("the second licence") to supply and sell electricity to a non-franchise customer to whom electricity is supplied under another licence ("the first licence") in accordance with the requirement referred to in sub-section (1) commences when -

(a) the first licence is suspended or revoked; or

(b) the right of the holder of the first licence to acquire electricity from the market for wholesale trading in electricity is suspended or terminated -

whichever first occurs, and ends after 3 months or when the non-franchise customer advises the holder of the second licence in writing that the supply and sale is no longer required, whichever first occurs."

493. All counsel accepted that this was a provision which addressed an emergency situation. Mr Beach submitted that the section contemplated more than one distribution company having a licence to "distribute or supply" electricity in the same area, where one supplier proved unable to fulfil its obligations to the non-franchise customers. "Supply" was being used in s. 163AAA(1) when first used, not in terms of "sell", Mr Beach submitted, thus, the section was concerned with competing distribution and supply licences held over the same area. The fact that (3)(a) did not require that the distribution company supply and sell "outside the distribution area" specified in its licence emphasised that the section was speaking of customers who had previously been "supplied" electricity on a retail basis pursuant to a licence distribution and supply licence held by another distribution company and covering the same area as that of the distribution company upon whom s. 163AAA was imposing an obligation, so Mr Beach submitted.

496. I agree with the contentions of Mr Young as to this section. I do not think the section is concerned, at all, with the question of overlapping licences for distribution and supply in a particular area. It is clear, and accepted on all sides, that sales to non-franchise customers were always open to competition, and that a distribution company from one area, which also held a licence to sell, might contract to sell electricity to a customer who resided in the area of another distribution company. The vendor company would provide the electricity that it was selling by having it transported along the distribution wires of the local distribution company, to the place where it was connected to the customer's residence. A fee was payable by the vendor distribution company for the transfer of electricity for that purpose within the distribution area of the other distribution company. This section, s. 163AAA, is concerned with the situation where the vendor company, for some reason, is unable to supply and sell to the customer as promised. It is a section concerned with retail sales, not overlapping distribution areas, and has nothing to say as to that concept, in my opinion. That is not to say that it provides any assistance to Mr Young, either, in advancing the case for exclusive distribution areas, save to the extent that it might further reflect the assumption made by the draftsperson that the natural monopoly in the distribution field was likely to continue indefinitely. It does not demonstrate that the legislation was intended to ensure that that was the case.

THE USE OF AMENDING LEGISLATION FOR INTERPRETING EARLIER LEGISLATION

500. Mr Young submitted that the defendants were seeking to interpret earlier legislation by resort to the terms of later amending legislation, a course which, he submitted, should be adopted only with caution as an approach to statutory interpretation: see Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492; Khoury v GIO (NSW) [1984] HCA 55; (1984) 165 CLR 622; Deputy Commissioner of Taxes (SA) v Elders [1936] HCA 64; (1937) 57 CLR 610; Murphy v Obst [1996] VICSC 11; [1996] 2 VR 613; TAC v Clarke [1994] VicRp 7; [1994] 1 VR 117; Shell Co v City of Melbourne [1997] 2 VR 615; Allina Pty Ltd v FCT [1991] FCA 78; 99 ALR 295; Hunter Resources Ltd v Melville [1988] HCA 5; (1988) 164 CLR 234.

503. Mr Young submitted that particular caution was required in the present case, because the amendments to which I have referred were not concerned, at all, with the issue of distribution activity, with which this case is concerned. The amendments, he submitted, are solely concerned with the sale of electricity; sale having been distinguished from distribution and "supply" in the amended terms of s. 161(1). For that reason, he submitted, it was particularly inappropriate that recourse should be had to the amendments to draw a negative inference, namely, that by referring to an exclusive right of sale, Parliament thereby intended to demonstrate that there was not, also, an exclusive right of distribution.

506. Whilst caution is required, the cases cited above confirm that I may refer to such later amendments for this purpose, particularly where they are amendments to sections of the same Part of an Act. Given the relative vagueness of the legislation, it is appropriate, in my opinion, that I gain such assistance as may be available in interpreting the scheme of Part 12. To that end, an examination of the legislative history has some value.

510. The terms of the originating motions, as first filed, focussed attention on what were said to be the consequences which would flow from a grant of a new or varied licence to Powercor. It was claimed that the Office should be restrained because its decisions would amount to a breach of an implied contractual term of exclusivity, a breach of statutory right to exclusive distribution, an interference with proprietary rights, a derogation from grant of such rights or impermissible interference with rights under the plaintiff's licence. Although an outline of argument addressing those topics were filed, very little attention was directed to these issues in the hearing, Mr Young concentrating his attention on new issues. I will, however, briefly deal with these other issues, as counsel all said that they did not abandon their respective contentions as to those issues.

513. Mr Young submitted that between October and December 1995, at about the time of the sale of shares in the newly privatised company - Citipower - the government had made statements amounting to representations as to the exclusive rights to distribution which the company would have over its licence area. Objection was taken by the defendant to reference to this material. Mr Young sought to support its use by suggesting that it demonstrated that Citipower had proprietary rights or private contractual rights which would be defeated should the construction be given to this legislation for which the Office contends, so as to deprive Citipower of exclusive distribution rights at Docklands. An interpretation of legislation which produced the result that existing private rights would be eliminated, should not be favoured over an interpretation which did not produce that result, he submitted: Clissold v Perry [1904] HCA 12; (1904) 1 CLR 363 at 373; Attorney General v Horner (1884) 14 QBD 245 at 256-7. Clear words were required to displace the presumption that Parliament did not intend to remove such rights Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 121 CLR 577, at 582. Any ambiguity should be resolved in favour of the plaintiff, Mr Young submitted: see Springhall v Kirner [1988] VicRp 21; [1988] VR 159.

516. The question before me is whether there is power to grant either the licence or variation that has been sought. I have heard no evidence concerning what, if any, representations, may have been made to the new shareholders of Citipower in 1995, but I am interpreting an Act which came into effect a year earlier. If Citipower has any right of action against the State by virtue to these contractual dealings then it can pursue that course if it wishes. I do not consider that I am assisted in my task of interpretation by reference to this untested material. (I identify the material to which reference was made as being a confidential information memorandum dated August 1995, an information memorandum (marked as "confidential") for the proposed sale of Citipower Limited, dated October 1995, and the Share Sale Agreement, of November/December 1995.)

519. Mr Beach submitted that even if there had been any misleading conduct by the State towards Citipower, and even if the plaintiff had been misled as to the exclusivity of its licences (which proposition, he submitted, could not be demonstrated from the material referred to), that was, at best, a matter for private suit against the government, and did not affect the power of the Office, notwithstanding the fact that by s. 7A of the ORG Act the Office was deemed to represent the Crown. Any such events could not bear upon the interpretation of the legislation, nor fetter the exercise of power under the statute.

522. Mr Young submitted that I should adopt an interpretation which would promote a result which did not constitute the defeat of private, or contract, rights held by Citipower or would not amount to a derogation from grant made by the licence to Citipower. The claim that there are contractual rights was predicated on the assumption that the licence could only be enforced by suing for breach of contract, but s. 35 of the ORG Act provides the Office with the power to enforce the licence terms and conditions. Furthermore, when originally granted, the licence was not transferable, an essential incident of a property right: see R v Toohey; Ex Parte Meneling Station Pty Ltd [1982] HCA 69; (1982) 158 CLR 327 at 342, per Mason J. It is unnecessary for me to decide this issue, but it seems likely that what is held by Citipower is a statutory licence, and not a private right at all, nor a property right. When Part 12 was first introduced the licence was not transferable (s. 167, which specified it to be non-transferable, was amended by Act 56 of 1995, to permit the transfer of a licence, in certain circumstances). Thus, my tentative view is that at the time when the licence was first granted any entitlement of the plaintiff would not have amounted to a property right. But even if it was a property right, that right, deriving as it would from statute, is limited by the terms of the statute, so that if the statute empowers a variation to the ambit of the right then the property right can not prevent that statutory exercise of power, by way of extinguishment or variation: see Commonwealth v WMC Resources Ltd [1998] HCA 8; (1998) 72 ALJR 280, at 286, 297, 307-8.

525. Alternatively, if there was a contract creating private rights then, as Mr Beach submitted, that private contract could not restrain the future exercise of statutory rights: Ansett Transport Industries v Commonwealth [1977] HCA 71; (1977) 139 CLR 54, at 74-75, per Mason J; Attorney General (NSW) v Quin (1990) 170 1, at 17 Per Mason CJ.

528. Furthermore, Mr Beach submitted, the plaintiff would be losing no entitlement with respect to its right to sell to franchise customers, because the Tariff Order provided for payment of its franchise fee on the basis of the volume of sales, and its exclusive right of sales to franchise customers - which continues to 31 December 2000 - is not challenged by Powercor. Mr Young accepted that there would be no loss of sales to franchise customers, but said that what his client loses arises by virtue of the fact that the equalisation charges are related to the distribution system, and Citipower is subsidising Powercor on account of what would no longer be an exclusive area of distribution, if Powercor's argument is correct. Mr Beach challenged the proposition that there would be any anomaly concerning the equalisation system, and submitted that even if there was it was a matter which the Office could readily adjust, in due course.

531. In my view, a reading of the Reform Reports to which Mr Young referred, and to Hansard, do lend support for his contention that there was an assumption made both by those making the reports, and by the Minister, in his Second Reading Speech, that distribution was and would remain a monopoly, as would transmission, in contrast to generation, and sale of electricity. I also agree with Mr Young that that understanding is reflected in the licences which were granted, and in the Codes which were brought into existence.

534. The real question raised by these proceedings, however, is whether the legislation manifested an intention that the natural monopoly as to distribution must remain, for the whole of the geographic area covered by the distribution licence, and, thus, whether the terms of the legislation demonstrate that it would be beyond power for the Regulator General to grant a licence, or variation of a licence, which would produce the result that more than one distribution licence might apply to all or part of the same geographic area.

537. The assumption that distribution would, as a practical reality, remain a natural monopoly, was the likely explanation for the imposition of a requirement of equalisation payments being weighted as between distribution companies. Thus, the objectives which the Office had to address included the prevention of the abuse of monopoly power. However, in my view, the legislation, as amended, neither entrenched nor prohibited the monopoly power. If it be true, as the Draft Decision seems to contemplate, that the granting of either of Powercor's applications might produce the practical result that Powercor will simply assume Citipower's monopoly position with respect to distribution, that, too, is not prohibited, because the legislation does not enshrine Citipower's monopoly position.

540. The fundamental answer to all of the claims concerning vested contract rights, proprietary rights or statutory rights is that in all instances the plaintiff's argument is predicated on the fact that the Act and/or its licence gave it exclusive rights to distribution. For the reasons I have stated, I do not accept that that is so and these arguments, accordingly, have no merit.

544. Mr Young submitted that were I to adopt the interpretation of the legislation for which the defendants contend, that would produce such anomalous consequences as to render it improbable that Parliament could have intended that result.

547. Counsel for the plaintiff submitted that the anomalous results become apparent when one has regard to the scheme of the legislation, as a whole, and when it is examined against the backdrop of the reform papers and other extrinsic material. The entitlement to look at the scheme as a whole so as to perceive the anomalous results was said to be consistent with what was said by Mason and Wilson JJ in Cooper Brookes (Wollongong) Pty Ltd v F.C.T. [1981] HCA 26; (1981) 147 CLR 297, at 322, and I accept that that is an appropriate way to test the issue.

550. The requirements set out in the licences, and the Codes, impose on the holder of a distribution licence the obligation to establish an infrastructure of wires and equipment which would be needed because of its obligation to connect any customer who required it to so connect them to the system. If a second licence were granted then, Mr Young submitted, two expensive parallel infrastructures would be created, or else, as the Office itself recognised, the owner of the first infrastructure to be installed would gain a monopoly. It could not be intended that two such infrastructures would need to be created, or that if only one could survive then the result would be that one monopoly would merely be replaced by another, Mr Young submitted.

553. In those circumstances, Mr Young suggested, Citipower might either have to forfeit its distribution licence, and leave the field to Powercor, or else, if it remained, then in order to meet its own obligations to customers, Citipower would be obliged to connect and supply customers by making use of Powercor's infrastructure, for which Citipower would be charged a fee by Powercor.

556. A further anomaly identified by Mr Young was that both distributors would have an obligation to supply public lighting at Docklands, and to guarantee uninterrupted flow of electricity along the wires. This would be even more surprising a result, it was submitted, because the new applications show that Powercor proposes to establish a distribution network which will operate at a different level of voltage to that of Citipower (an issue of fact which I have not inquired into, and will ignore for present purposes).

559. If the proposed licence or variation succeeds then, so Mr Young submitted, Citipower will not only lose revenue from potential Docklands customers, but Powercor will not be providing any cross subsidy for its Docklands undertaking. Although Citipower's customer base will have been reduced, because Powercor gained unintended access to Citipower customers, Citipower would continue to be subsidising Powercor through the equalisation adjustment, without having the benefit of the profits from Docklands. That would be an anomalous result, Mr Young submitted, as would be the situation that two companies would each hold responsibility for such matters as public lighting within the area of the distribution licence.

562. Mr Beach submitted that whether these anomalous consequences would result, at all, was a question of fact, which has not been tested in these proceedings, and the Office disputes the suggestion that any anomalous consequences would flow, at all. Furthermore, the plaintiff was always at risk of having amendment made to the terms of its licence, he submitted.

565. Of course, under s. 163(3)(c) the Office could vary terms and conditions of Citipower's licence, and grant exemptions, so as to overcome any such anomalies. The right to vary the instruments arises, also, under s. 27 of the Interpretation of Legislation Act (set out hereunder):

"27. Implied power to repeal or amend subordinate instruments

Where an Act confers power to make a subordinate instrument the power shall, unless the contrary intention expressly appears, be construed as including a power, exercisable in the same manner and subject to the same conditions or limitations (if any), to repeal or amend a subordinate instrument made in the exercise of that power."

570. I accept that the mere fact that the effect of these anomalous situations (if they arose) could be ameliorated by simply changing some of the terms and conditions of Citipower's or Powercor's licences, or of the Codes, does not affect the fact that the identification of anomalies is a pointer to the proper interpretation which should be given to the legislation. But it is merely a pointer.

573. Where there is a clear, literal, meaning arising from the words of an enactment, and no real doubt as to the intention of Parliament then the fact that that meaning produces anomalies or injustices would not permit the court to depart from the literal meaning of the words. The fact that absurdity, injustice or anomaly will be produced, may however itself give rise to doubt as to whether Parliament intended the literal meaning to prevail, and thus the literal meaning might be departed from: see Mills v Meeking, supra, at 242, per McHugh J; Cooper Brookes (Woollongong) Pty Ltd v F.C.T, supra, at 394, per Gibbs CJ. Where the words in a statute are precise and unambiguous they serve best to declare the intention of the legislature (see Re Bolton; Ex Parte Beane [1987] HCA 12; (1987) 162 CLR 514, at 518; Thompson v Judge Byrne [1999] HCA 16; (1999) 73 ALJR 642, at 653). Furthermore, when the express words of a legislative provision are reasonably capable of only one construction and neither the purpose of the provision nor any other provision in the legislation throws doubt on that construction, a court cannot ignore it and substitute a different construction because it furthers the objects of the legislation: per McHugh J in Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85, at 109. Whilst it may be said that the legislation is relatively limited in its terms, and does not, in clear terms, spell out, either way, whether a distribution licence gives exclusive rights to distribution and supply in the area of the licence, that does not indicate that there is ambiguity in the legislation, so that an interpretation which avoids the suggested anomalous results should be preferred. From another perspective it may be said that the situation is, in fact, quite clear. The contention for which the plaintiff argues, namely, that the legislation grants it an exclusive area of distribution and supply, gains no support from any of its provisions and the prohibition on the power of the Office to grant a licence to Powercor over the same area as that to which its own licence applies, is not demonstrated by any of its provisions either. In other words, there is no indication at all, in my opinion, that the Office would be prohibited from granting a further distribution licence to the same area as that identified in an existing licence.

576. In any event, I am not persuaded that the outcomes identified by Mr Young do amount to such absurd, unjust or anomalous results as to lead to a different interpretation of the legislation than that which I have given to it. Even if the outcomes, as predicated, were established as probabilities, those outcomes would not cast doubt on my interpretation of the Act.

WHETHER THE VARIATION PROCEDURE WAS AN APPROPRIATE OPTION

580. Although the Office has indicated that it will consider the applications by dealing with the new licence application, rather than the variation application, that is not a concluded position, and so I have been asked to consider whether, even if there was power to grant a new licence, there was power and/or whether it would be inappropriate, for there to be a variation, in any event.

(1) A licence or the licence conditions may be varied -

(a) in accordance with the procedures specified in the licence conditions; or

(b) by agreement between the Office and the licensee; or

(c) by a notice in accordance with sub-section (2) served on the licensee.

(2) The Office must not vary a licence or the licence conditions by a notice unless -

(a) the Office is satisfied that the variation is necessary having regard to the objectives specified in section 157; and

(b) the Office has given the licensee an opportunity to make representations on the matter.

(3) The Office may revoke a licence in accordance with the procedures specified in the licence conditions or, in the case of a licence to generate electricity for supply or sale or a licence to distribute or supply electricity (other than a licence to which an approval under section 162(2AA) applies), if it is satisfied that the holder of the licence -

(a) is not a company incorporated under the Corporations Law of Victoria; and

(b) is not a statutory authority; and

(c) is not a corporation all the shares in which are held by, or on behalf of, the State or by a statutory authority."

590. Mr Young submitted that it could not be the case that by mere agreement the Office could ignore the provisions of s. 157. Furthermore, he submitted, variation is intended to relate to a change to a licence holder's own licence, one which affects only that licensee, and its clients, not another licensee; it would be a particularly inappropriate approach to adopt here, given the breadth of what Powercor is seeking by way of a variation. Finally, Mr Young submitted that if it is sought to rely on the notice provisions of s. 164(1)(c), no necessity for the variation has been demonstrated as required, by sub-section (2).

593. As I have earlier stated, although the variation application has not been withdrawn the Office has announced that it will deal with the application not by way of variation, but as an application for a new licence. The question whether the variation is being sought under s. 164(1)(b) or (1) (c) does not arise. It is, however, clear from what is said in the Draft Decision that the Office had never intended to treat it as a variation by notice pursuant to s. 164(1)(c). Thus, the considerations of sub-section(2) (which relate only to a notice of variation situation, under paragraph (1)(c)), do not arise (although the objectives under this Act and the ORG Act would have general relevance, whatever sub-section was being applied).

596. Mr Beach submitted that a variation of licence so as to add Docklands to the existing licence area would be merely a variation of conditions, as recognised by s. 164(1). Furthermore, whilst no provision requires that notice, in such circumstances, be given to Citipower, notice has in fact been given. The absence of notice provisions says nothing as to the power to grant a variation, but, in my view, it does point to the fact that, as Mr Young argued, it would not be appropriate to adopt a variation approach rather than a new application approach here.

599. My tentative view is that assuming the Office had power to deal with the matter by way of a variation application it would have been inappropriate for the Office to have proceeded in that way. That view does not represent a concluded opinion as to whether the Office had power to deal with the variation application, rather than the new licence application. Given the fact that the Office had advised that it will not proceed with the variation application, and Powercor has accepted that approach, then notwithstanding the fact that the variation application has not been formally withdrawn, it seems to me to be inappropriate to finally rule on this question. The argument before me concentrated attention on the question whether a new licence could be granted.

604. I have concluded that the Office of Regulator General has power to consider and, if appropriate, grant Powercor's application for a licence to the Docklands area.

607. The originating motion concerning the variation application is really predicated on the same arguments as to the terms of the Act, and as to the powers of the Office, as arise in the separate proceedings relating to a new licence. I have rejected the contentions of Citipower as to the interpretation of the legislation which should be adopted. In the circumstances, it is appropriate that both proceedings should be dismissed and I decline to grant the relief sought by the plaintiff in its applications.

610. Both proceedings will be dismissed. I will hear the parties as to costs.