Delta Power & Energy (Vales Point) Pty Ltd ACN 162 696 335 v Australian... [2025] NSWSC 1087 | Case summary | Zoe

NSWNSWSC

Delta Power & Energy (Vales Point) Pty Ltd ACN 162 696 335 v Australian Energy Market Commission

[2025] NSWSC 1087

Supreme Court of NSW|2025-09-23|Before: Griffiths AJ

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Court

Supreme Court of NSW

Decision date

2025-09-23

Before

Griffiths AJ

Catchwords

ADMINISTRATIVE LAW — review of decision of Australian Energy Market
Commission — status of Compensation Guidelines —
whether Commission
failed properly to apply Compensation Guidelines — whether plaintiff

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Catchwords

ADMINISTRATIVE LAW — review of decision of Australian Energy MarketCommission — status of Compensation Guidelines —whether Commissionfailed properly to apply Compensation Guidelines — whether plaintiffdenied procedural fairness —whether Commission acted in irrational,illogical or unreasonable manner — whether Commission contravenedprinciple in R vAustralian Broadcasting TribunalEx parte Hardiman (1980) 144CLR 13[1980] HCA 13

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: Delta Power & Energy (Vales Point) Pty Ltd ACN 162 696 335 v Australian Energy Market Commission [2025] NSWSC 1087

Hearing dates: 02 to 03 September 2025

Date of orders: 23 September 2025

Decision date: 23 September 2025

The plaintiff (Delta) brings a judicial review challenge to a decision dated 16 May 2024. The decision was made by the Australian Energy Market Commission (AEMC), which is the regulator under the national electricity market scheme. The AEMC refused Delta’s claim for opportunity costs compensation under the compensation scheme provided for in cl 3.14.6 of the National Electricity Rules (Rules) and as implemented in the AEMC’s Compensation Guidelines dated 21 October 2021 (Guidelines).
Delta owns and operates two coal-fired electricity generation units at Vales Point near Lake Macquarie and sells electricity into the National Electricity Market (NEM). In broad outline, Delta’s claim for opportunity costs compensation related to a period in mid-2022 when record high wholesale electricity prices resulted from a series of events, including adverse coal mine conditions, bad weather and the war in Ukraine, all of which combined to produce coal scarcity for coal-fired electricity generators, including Delta. This coincided with record high wholesale electricity prices, which caused the Cumulative Price Threshold (CPT) to be exceeded. The Australian Energy Market Operator (AEMO) intervened and imposed an Administered Price Cap (APC) on wholesale electricity prices in the spot market, fixing the level of $300/MWh during an Administered Price Period (APP). Around this time, AEMO also requested Delta to increase its electricity generation to ensure system reliability. Delta was experiencing coal constraints in its coal supply, but it nevertheless managed to bring forward some of its coal deliveries so as to comply with the AEMO’s request. It says that this prolonged its coal scarcity beyond cessation of the APP.
Delta’s case is that it would have preferred to have preserved its scarce coal resources during the APP and then generate more electricity when electricity prices lifted. Instead, it said that it had to purchase electricity from the spot market during the period of the APP in order to meet its wholesale contract obligations and, following the APP, it was forced to reduce its production levels to further conserve coal despite higher spot market prices.
These reasons are structured as follows:

In the period leading up to 10 June 2022, the AEMO reported that the NEM was “experiencing a prolonged period of high electricity prices”. It noted that wholesale spot prices in the NEM and eastern Australian gas markets reached unprecedented average levels and regional markets were close to reaching the CPT for many days leading up to 10 June 2022 (see Australian Energy Market Operator, NEM Markets Suspension and Operational Challenges in June 2022*,* (August 2022)). (The CPT represents the limit of aggregate dispatch prices over a period of seven days.)
Key factors producing the high and volatile wholesale spot prices were identified by the AEMO as fuel supply constraints, early onset of winter temperatures and associated high demands, transmission network outages, generation availability, and east coast gas market and thermal coal prices.
On 12 June 2022, at 6:50 pm, the regional cumulative price in Queensland exceeded the CPT. This marked the commencement under cl 3.14.2(d1) of the Rules of an APP in the region and the imposition of an APC, which at the time was $300/MWh.
On 13 June 2022, at 6:35 pm, the CPT was exceeded in New South Wales. This marked the commencement of an APP in that region and the imposition of an APC, which at the time was also $300/MWh.
On 15 June 2022, at 2:05 pm, due to difficulties in the NEM operating in accordance with the Rules, the AEMO suspended the spot market in all regions of the NEM under cl 3.14.3 of the Rules. The AEMO also issued directions to market participants in respect of scheduled generation, scheduled load and market network services. During this time, the AEMO requested Delta (as opposed to giving a formal direction) to increase its electricity production.
The APP ended when the CPT was no longer exceeded. In New South Wales and Queensland, this occurred on 23 June 2022. The AEMO lifted the market suspension in all regions from 2:00 pm on 24 June 2022.
On 22 June 2022, Delta notified the AEMC of a claim for compensation for direct and opportunity costs arising from the imposition of an APC during the APP in Queensland and New South Wales between 6:50 pm on 12 June 2022 and 2:00 pm on 15 June 2022 (First Period).
On 30 June 2022, Delta notified the AEMC of a claim for compensation for direct and opportunity costs arising from the imposition of an APC in New South Wales between 2:00 pm on 15 June 2022 and 4:00 am on 23 June 2022 (Second Period).
On 1 July 2022, the AEMC acknowledged receipt of Delta’s claims for compensation and requested that Delta provide supporting information. A checklist for opportunity costs claims prepared by the AEMC drew a distinction between demonstration of scarce capacity or resources as a result of a technical or commercial limitation, on the one hand, and, on the other, calculation of the value of a more profitable alternative opportunity. For further guidance on the topic of scarce capacity or resources, the AEMC referred claimants to [5.3.3] of the Guidelines.
As will emerge, Ground A1 focuses attention on the distinction between technical or commercial limitations and valuing a more profitable alternative opportunity. Delta claims that, properly construed, for it to demonstrate eligibility for compensation the Guidelines did not require it to show that there was a more profitable alternative opportunity because such a finding was necessarily implicit in it demonstrating technical or commercial limitation.
On 6 December 2022, Delta provided further information to the AEMC in support of its claims for compensation (which totalled $14,657,936), including an expert report prepared by Marsden Jacob Associates (that report purported to summarise various trading logs of communications between Delta and the AEMO during both the First and Second Periods and was the subject of a joint post-hearing statement).
Delta told the AEMC that it no longer pursued its claim for direct costs. It summarised its opportunity costs claims as follows (emphasis added):

Thus, the definition of “statutory instrument” for the purposes of cl 41 is broader than the definition of “statutory instrument” in cl 10. But despite that broader definition in cl 41, I do not consider that it extends to cover any instrument made under the Rules, as opposed to the Rules themselves. Insofar as the Rules are concerned (which are included in the definition of “statutory instrument” in cl 41), they are required to be construed as operating to the full extent of, but so as not to exceed, the legislative power of the Legislature or the power conferred by the NSW Law under which they are made (see Sch 2, cl 42(1)).
As previously mentioned, the Guidelines are made under cl 3.14.6(e) of the Rules. I accept the AEMC’s contention that the Guidelines are not statutory instruments within the meaning of cl 10 (or cl 41) of Sch 2 of the NSW Law. Nor are they statutory instruments to which the interpretation rules in Sch 2 of the NSW Law apply.
As previously noted, although the Rules oblige the AEMC to apply the Guidelines in making a decision in response to an opportunity costs compensation claim, there is no obligation to do so if the AEMC is satisfied that there are compelling reasons not to do so (cl 3.14.6(s)(2)). This conferral of discretion on the AEMC not to apply the Guidelines is a powerful indicator that the Guidelines are not given the force of law by the Rules or otherwise (see later below).
Delta contended that the Interpretation Act 1987 (NSW) is not disapplied in terms by s 3 of, and Sch 2 to, the NSW Law. After noting that the word “instrument” is defined in s 3(1) of the Interpretation Act as an “instrument … made under an Act, and includes an instrument made under any such instrument”, Delta submitted that the Rules are an instrument made under the NSW Law and, because the Guidelines are made under cl 3.14.6(e) of the Rules, they can fairly be characterised as an “instrument made under any such instrument”, thereby attracting the Interpretation Act. I strongly doubt that this is correct. Subject to displacement of Sch 2 by contrary intention, as provided for in cl 1 of Sch 2, it appears the very purpose of that Schedule is to substitute for the Interpretation Act the provisions relating to interpretation set out in Sch 2 (noting also that it is made clear in s 8(2) of the NSW Act that the Acts Interpretation Act 1915 (SA) does not apply).
Ultimately, however, Delta submitted that the Guidelines were not delegated legislation but were nevertheless an instrument to which the Interpretation Act applies and, to that extent, could be described as having the effect of delegated legislation.
The issue whether or not the Interpretation Act applied to a Ministerial Guideline was raised in Granville Hotel Operations Pty Ltd v Independent Liquor and Gaming Authority [2023] NSWCA 248; 413 ALR 499, in a different context to that here. The issue had some potential significance in that case because, if the Interpretation Act applied, s 8(c) provided that (subject to a contrary intention) “a reference to a word or expression in the plural form includes a reference to the word or expression in the singular form”, which provided some support to the appellant’s construction of the Ministerial Guideline. Ultimately, however, the issue did not need to be resolved in that appeal.
Nor is it necessary to resolve the issue here. That is partly because Delta did not point to any particular provision in the Interpretation Act which would lead to a different conclusion when compared with what I consider to be the preferred approach to construction of the Guidelines, which focuses on text, context and purpose. As Kirk JA stated in Granville Hotel at [41] (with reference to the construction of different guidelines made in a different context but where the general observations are nevertheless apposite):

Ground A1 assumed that decisions purportedly made under the Guidelines are amenable to judicial review for jurisdictional error or error of law on the face of the record as apply to judicial review of decisions made under primary or subordinate legislation. For reasons set out above, I strongly doubt Delta’s contention that the Guidelines have the effect of delegated legislation. Rather, I consider that they are probably better characterised as “soft law”: their purpose is to provide non-binding guidance rather than commands (see M Aronson, M Groves and G Weeks, Judicial Review of Administrative Action and Government Liability (7th ed, 2022, Thomson Reuters) at [4.120]). Assuming, without deciding, that familiar grounds of jurisdictional error such as misunderstanding the task required and asking the wrong question are available grounds in Delta’s judicial review challenge to the decision and the AEMC’s purported application of the Guidelines, I will now explain why I am not persuaded in any event that these grounds have been established.
Those grounds essentially turn on the proper construction and application of the Guidelines. That task involves an objective consideration of text, context and purpose (see generally, P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [19.60]–[19.80]). I consider that those three matters are relevant whether or not the Guidelines are properly characterised as subordinate legislation.
Returning to the task of construction and focusing for the moment on text, the need to demonstrate foreclosure of an alternative opportunity to use scarce capacity or resources is implicit in the definition of “opportunity costs” in both the Rules and Guidelines. Hence, in cl 3.14.6(a) of the Rules, “opportunity costs” are defined as “the value of opportunities foregone by the claimant due to the price limit event as defined in the compensation guidelines” (emphasis added). The notion of a claimant having foregone opportunities is an element of that definition.
A broader but still consistent definition is then set out in [5.3.1] of the Guidelines (which is reproduced at [40] above).
Once again, the notion of foreclosure of an alternative opportunity forms part of the definition of opportunity cost. The second part of the definition in the Guidelines refers to both the foreclosure element and the scarcity element, which indicates that both elements must be demonstrated before consideration is to be given to placing a value on the foregone profitable opportunity.
Secondly, I do not accept Delta’s submission that demonstration of the existence of a technical or commercial limitation per se constitutes the sole criterion of eligibility to claim opportunity costs compensation. Rather, as explained immediately above, there are two elements to such eligibility, which are reflected in the questions posited by the AEMC in [2.2] of the Final Report. I accept the AEMC’s submission that nothing in [5.3.2] or [5.3.3] of the Guidelines undercuts the requirement in [5.3.1] to demonstrate the foreclosure element of what constitutes an opportunity cost.
Thirdly, and consistently with the analysis above, the distinction between demonstrating scarce capacity as required by [5.3.3] and valuing the opportunity costs does not gainsay the need to show foreclosure of a more profitable opportunity to establish eligibility. It is only after a claimant has demonstrated to the AEMC’s satisfaction that it has suffered both scarce capacity or resources as well as the foreclosure of an alternative opportunity to use that scarcity more profitably that the need to value that alternative opportunity then arises.
Fourthly, it is important not to overlook the fact that the Rules do not contemplate that compensation will be payable for every opportunity costs situation. Part of the AEMC’s obligation to publish the Guidelines on compensation, as required by cl 3.14.6(e) of the Rules, is to define the types of opportunity costs which may be claimed. This strongly suggests that not all opportunity costs are compensable.
Turning now to considerations of purpose, mention has already been made of the stated objective in cl 3.14.6(c) of the Rules of paying compensation relevantly so as “to maintain the incentive for: (1) Scheduled Generators … to supply energy; … during price limit events”. But that objective does not exist in a vacuum. It must be viewed in the context of the Rules and the Guidelines as a whole. Their effect is to provide parameters or a framework for determining whether or not compensation will be paid. It would grossly overstate the position to say that the Rules and Guidelines require that compensation must always or generally be paid to a generator such as Delta simply to maintain the incentive for it to supply energy during price limit events. Conformity with the relevant criteria must be established to the AEMC’s reasonable satisfaction.
By broad analogy, in Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47 at [5], Gleeson CJ helpfully emphasised the limits of a purposive construction in some particular instances, albeit by reference to statutory construction (footnotes omitted):

As to the first of those reasons, Delta contends that it says nothing as to whether Delta had scarce resources as a result of a technical limitation. It also claims that there is no logical connection between that fact and the AEMC’s adverse finding about the non-existence of a technical limitation. Delta contends that, on the contrary, the fact that it brought forward deliveries of coal to June 2022 lent support to its claim, which the AEMC appeared to accept, that it was coal-constrained at that time.
As to the second reason, Delta contends that it also reveals illogicality in the AEMC’s reasoning and exposes a misunderstanding of the applicable law. It contends that there is nothing in cll 3.14.6(b)–(d) of the Rules which requires a claimant for compensation to establish attempts were made to restore any limitation on their scarce resources or capacity which restricted their ability to supply energy during, or after, an APP. Similarly, Delta contends that the Guidelines impose no such requirement and that the only pre-condition to eligibility is that a claimant demonstrate that it had scarce capacity or resources as a result of a technical limitation.
Delta also contends that the AEMC failed to engage at all with the evidence and submissions provided by Delta on this subject. Delta pointed in particular to the material it provided to the AEMC in December 2022 (see at [19] above).
For the following reasons, I do not accept Delta’s contentions concerning Ground 1(a).
First, contrary to Delta’s assertion, the AEMC did not require Delta to establish that attempts were made to restore Delta’s stockpile during and after the APP. Rather, in response to Delta’s assertion that by bringing forward coal deliveries from July 2022 it had a technical limitation in July 2022, the AEMC tested that assertion by considering whether Delta had the ability to restore its stockpile. It did so by reference to the evidence, including whether there was evidence of attempts to restore the stockpile. This did not elevate attempts to restore the stockpile to a “condition” of establishing a technical limitation. Rather, the AEMC considered it to be a factor to be taken into account in reaching the overall conclusion that Delta had not shown the claimed technical limitation. As senior counsel for the AEMC put it in her oral address:

Secondly, and in any event, the AEMC did not err in considering whether there was evidence of Delta’s attempts to restore its coal stockpile. Paragraph 5.3.3 of the Guidelines permitted the AEMC to consider factors such as “[t]he available resources of the plant under the conditions at the time, including starting resource level, potential rate of resource inflows and minimum resource storage limits” and “[a]vailable alternative resources, which may be determined by the demand-supply balance in the market” in considering whether there was technical limitation. These factors plainly encompass attempts to restore a coal stockpile. Furthermore, the chapeau to this list of factors states, “… the AEMC may consider factors such as …” (emphasis added). The list is non-exhaustive and does not forbid consideration of attempts to restore a stockpile.
Thirdly, Delta has not made good its claim that the AEMC failed to engage with the material it provided to the AEMC, with particular reference to the material provided on 6 December 2022 (see at [17]–[19] above). I consider that the AEMC adequately addressed the evidence and submissions provided by Delta in support of the claimed technical limitation. As noted above, in [2.2.2] of the Final Report, the AEMC summarised Delta’s basic arguments, but concluded that Delta had provided limited evidence of attempts to restore the coal stockpile following the APP, pointing in particular to Delta’s failure to adduce evidence of any attempts by it to restore the stockpile following the APP by either bringing forward additional deliveries or purchasing spot market coal, as well as noting that Delta purchased less coal than was made available to it through a procurement it conducted in late June 2022. Fairly read, the reference to “bringing forward additional deliveries” refers back to Delta’s submission that it had brought forward some coal deliveries due in July and August 2022 to June 2022. The reference to Delta not adducing evidence that it purchased spot market coal in the period following the APP contrasts with Delta’s claim that it had made purchases on the spot market during the First and Second Period. I see no error in the AEMC applying weight to that contrast.
The second matter, concerning the finding that Delta purchased less coal than was made available to it through a procurement it conducted in late June 2022, is a finding of fact. In making this finding, the AEMC implicitly reasoned that Delta could have purchased more coal than it did. Delta does not claim that there was no evidence to support that finding. Nor does the finding or the reasoning which accompanied it evince any misapprehension on the AEMC’s part.

Secondly, the AEMC did consult with Delta pursuant to cl 3.14.6(r) of the Rules on the matters in cl 3.14.6(q) by providing Delta with a draft decision on 13 December 2023. Critically, pages 10 and 11 of that draft decision squarely put Delta on notice of the relevant issue. Page 11 expressly informed Delta that the AEMC was proposing to find that “it was able to restore its coal stockpile during and following the APP” (emphasis added). It also expressly informed Delta that “all potential sources of coal supply were not exhausted” (second bullet). If Delta had wanted to challenge this proposed finding, evidence of failed attempts to restore its stockpile would have been an obvious source to put before the AEMC.
Thirdly, although I was initially attracted to Delta’s submission that the conclusion in the AEMC’s Final Report that “Delta provided limited evidence of attempts to restore the stockpile following the APP” was the “opposite” to what had previously been stated in the draft decision, I am not satisfied that Delta has made good this claim. In the draft decision, the AEMC had written that Delta had not “demonstrated it was actually technically limited because it was able to bring forward coal deliveries and it was able to restore its coal stockpile during and following the APP” (emphasis added). An “opposite” conclusion would have been to conclude that Delta was not able to restore its stockpile after the APP, but this is not what the AEMC did. In fact, the conclusion reached in the Final Report was broadly consistent with the draft, albeit less emphatic. The second bullet point after the statement about limited evidence stated: “Delta purchased less coal than was made available to it through a procurement it conducted in late June 2022”, suggesting an ability to restore the stockpile.
Fourthly, although I consider that the documentary material referred to above provides a sufficient answer to Delta’s procedural unfairness claim, I also accept the evidence of Mr Drew Butterworth, a director in the Networks and Technical Policy Team of the AEMC, that Delta was put on notice at several meetings and by an information request that the AEMC was interested in reviewing any evidence regarding Delta’s attempts to restore the stockpile after the APP concluded and during the claim period, which extended into July. In brief, his evidence was as follows:

I do not accept that Mr Aulbury was unaware that the AEMC’s interest on this subject extended into July.
While Mr Aulbury initially acknowledged that the AEMC was interested in Delta’s ability to restore its stockpile during and following the APP (see at T49.34), he subsequently changed his evidence on the basis that he understood that the claim period had to be confined to the period of the APP (see at T51.23). I was left with the impression that Mr Aulbury’s evidence on this matter was not driven by any misunderstanding on his part as to the meaning of the “claim period” but rather was intended to bolster Delta’s complaint of procedural unfairness in not being given an opportunity to provide material regarding its coal procurement efforts beyond the APP period and into July 2022.
A further example relates to another aspect of Mr Aulbury’s evidence concerning Delta’s opportunity to respond to the draft decision. When cross-examined on this topic, Mr Aulbury said that although the AEMC’s letter dated 13 December 2023 said that draft decision was provided for the purposes of consultation under cl 3.14.6(r) of the Rules, he was given a different message about that from Mr Butterworth. He said that Mr Butterworth had told him that the opportunity was “more like a fact check” rather than a fuller opportunity to respond. He then added that he thought “that was sort of highlighted by the very quick turnaround, given it was over the Christmas/New Year period”.
This evidence from Mr Aulbury was troubling in two respects. First, as Mr Aulbury ultimately confirmed, he had not set out in either of his affidavits this conversation with Mr Butterworth in which Mr Aulbury claimed he was led to believe that the process of responding was “more like a fact check” as opposed to a fuller response.
Secondly, and perhaps more troublingly, the emphasis Mr Aulbury placed on the “very quick turnaround” for Delta to respond given that it was over the Christmas/New Year period was less than candid. Although the AEMC’s letter dated 13 December 2023 set a deadline for Delta’s response at 5 January 2024, Mr Aulbury failed to mention that Delta had in fact sought and obtained two extensions such that the deadline became 23 January 2024. Nor did he mention that Delta actually provided its response to the draft decision five days earlier than the 23 January 2024 deadline. This is inconsistent with the impression he gave in his oral evidence that Delta was subject to a “very quick turnaround”.
For all these reasons, I am reluctant to accept Mr Aulbury’s evidence on any controversial issue unless it is corroborated by documentary or other independent evidence.
In contrast, I have no reservations in accepting Mr Butterworth’s evidence on any controversial issue. He was an impressive witness who gave thoughtful and measured answers in cross-examination. He made appropriate concessions and properly declared when he had no particular recollection of an event. Large parts of his evidence were also corroborated by contemporaneous documentation, including speaking notes and file notes he prepared before, during or after meetings with Mr Aulbury.
For all these reasons, I reject Delta’s claim of procedural unfairness. It is unnecessary in these circumstances to address the question whether or not any procedural unfairness would have been material.

As noted above, in concluding that no technical limitation had been established by Delta, the AEMC relied upon the fact that, although certain Delta coal deliveries were not fulfilled on four days in June 2022, and there was evidence of more widespread coal procurement challenges, there was also evidence that Delta’s coal stockpile grew during and after the APP.
I have summarised above Delta’s contentions as to why it said the AEMC’s finding was illogical and made without regard to material provided to it by Delta (see at [93] above).
The AEMC acknowledged that the decision it had to make under cl 3.14.6 of the Rules was subject to an implied condition that it be made within the bounds of reasonableness (referring by analogy to SZVFW). It emphasised, however, that where statutory decision-making is involved, unreasonableness requires demonstration that a decision is irrational, if not bizarre, such that no reasonable person could have arrived at it (citing SZVFW at [82]). It contended that the more stringent standard should apply here. It referred to the well-known statement of Crennan and Bell JJ in Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611; [2010] HCA 16 at [131], where their Honours said that if “probative evidence can give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in respect of the conclusions to be drawn from that evidence, a decision cannot be said by a reviewing court to be illogical or irrational or unreasonable, simply because one conclusion has been preferred to another possible conclusion” (emphasis added).
The AEMC also correctly acknowledged that a conclusion of legal unreasonableness may be “outcome focused, where for example, there is ‘no evident or intelligible justification’ for the decision” (citing SZVFW at [82] and Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 at [76]).
I accept the AEMC’s submissions as to why Delta’s complaints regarding Ground 1(c) should be rejected.
First, there was no unreasonableness in the AEMC considering evidence that Delta’s stockpile had grown when evidence of this kind is not forbidden by cl 3.14.6 or any part of the Guidelines. Indeed, as noted above, there is express reference to “available alternative resources” in [5.3.3] of the Guidelines.
Secondly, the way in which the AEMC used the evidence of Delta’s stockpile growth was not unreasonable or illogical. The AEMC did not simply connect the fact of stockpile growth with the non-existence of a technical limitation. Rather, the AEMC pointed to the evidence of stockpile growth as tempering the evidence put forward by Delta that some of its coal deliveries were missed and that coal procurement challenges were widespread. Thus, there was mixed evidence on the issue of a technical limitation. That is relevant to whether the AEMC could be satisfied that Delta had established such a limitation, in circumstances where Delta had the onus.
Thirdly, Delta’s contention that the fact it brought forward its July/August coal deliveries to June 2022 (i.e., increased its stockpile in June) lends support to its claim that it was coal-constrained is merely a merits argument. Whether or not it is correct is not to the point, because it cannot be said that Delta’s point of view is the only conclusion that can be drawn from the fact of stockpile growth. Another logical conclusion that was open was that Delta’s coal supply was not as limited as it had suggested (see SZMDS at [131]). This is particularly so where Figure 2.1 in the Final Report (which is set out at [52(a)] above) depicts growth in the stockpile in June and July 2022, meaning that bringing forward coal deliveries to June cannot be the only explanation for stockpile growth during and after the APP.
As to Delta’s complaint of “illogicality”, putting aside whether or not this claim was properly pleaded, it is rejected for the following reasons. First, there was no relevant unreasonableness or illogicality in the AEMC testing Delta’s assertion that by bringing forward coal deliveries from July 2022 it had a technical limitation in June-July 2022 by considering whether it had the ability to restore its stockpile. It is obvious that the extent of a generator’s ability or inability to restore their input resources would be relevant to whether they suffered from a relevant limitation.
Secondly, as to Delta’s claim that the AEMC reasoned irrationally by finding that Delta had provided only limited evidence of restoration of the stock pile following the APP because Delta says this has no rational bearing on whether it was coal-constrained during the APP, it may well be the case that a generator like Delta might decide not to purchase additional coal after an APP for a variety of reasons. But that does not demonstrate illogicality or unreasonableness in the sense required in SZMDS at [131]. A decision is not illogical or irrational or unreasonable simply because one conclusion has been preferred over another possible conclusion (or path of reasoning). Indeed, I consider that Delta’s submissions on this topic are in truth a challenge to the merits of the AEMC’s relevant findings and analysis and not their legality.

While the AEMC accepted Delta’s claim that it purchased spot market energy at high prices to meet its contract positions, it concluded that this did not demonstrate a commercial limitation because it was not satisfied that Delta had exhausted all potential avenues to relieve its coal constraint. Delta contends that this conclusion is vitiated by the error alleged in Ground 1(a). It also contends that it is vitiated because whether Delta attempted to replenish its stockpile does not rationally bear on whether it had scarce resources as a result of a limitation. I reject those claims and repeat the reasons given above for rejecting Grounds 1(a) and (c).
Delta’s alternative argument is that, in reaching this conclusion, the AEMC failed to consider or misunderstood Delta’s material concerning its purchase of expensive spot market electricity to meet its contractual commitments, which it asserted was a “penalty” (Ground 2(b)). Delta’s essential contention is that it provided material about “the risk of its exposure to financial penalties based on its inability to meet its contractual obligations due to its scarce coal stockpile levels”, and that bare statements in the Final Report that the AEMC took all submissions etc., into account are insufficient to demonstrate that it did so.
This contention is also rejected. The AEMC both considered and understood all relevant material on this issue. First, the applicable material that Delta says was ignored was simply an assertion that, because of its low stockpile, it had purchased expensive spot market energy (at an $8m loss) to meet its contractual obligations. However, this material was referred to in the Final Report (at [2.2.3]). The AEMC acknowledged that Delta had provided evidence of its spot market purchases and it accepted Delta’s claim that the prices during the APP were “high prices for a coal generator”. It repeated, however, that it was not satisfied that Delta had exhausted all potential avenues to relieve its coal constraint, i.e. implying that there were other options open to Delta apart from paying high spot market prices. It is plain from this, and the more general statements by the AEMC that it had taken Delta’s information and submissions into account, that the AEMC considered and understood this material. The fact that there was no more detailed analysis may be explained by the fact that some of this information was “commercial-in-confidence”.
Secondly, it may be accepted that the AEMC had to take into account submissions made in response to the DOCM: see cl 3.14.6(s)(1) of the Rules. Delta provided a draft response to the DOCM on 17 October 2023, which was then followed by a shortened version on 19 October 2023. It is evident from [15] of the executive summary to the Final Report that the AEMC considered Delta’s submission on the DOCM. Moreover, no reason has been shown to doubt the accuracy of the more general statement at [17] of the executive summary to the Final Report that the AEMC had “taken all submissions into account, including Delta’s response to the draft decision, in making the final decision”.
Thirdly, I do not accept that the AEMC was obliged to consider or refer to every piece of evidence presented by Delta. To the extent that Delta relied on what was said in Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 197 ALR 389 at [24] per Gummow and Callinan JJ and in Re M**inister for Immigration and Multicultural Affairs; Ex Parte Miah (2001) 206 CLR 57; [2001] HCA 22 at [81] per Gaudron J, reference should be made to Basten JA’s important observation on those authorities in Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244; 61 MVR 443 at [22]:

Delta’s claim was that it would conserve generation if its coal stockpile decreased below a set minimum target based on covenants with its financier. However, the AEMC found that it did not substantiate the covenants with evidence, nor was the minimum target outlined in an internal policy. Ground 2(c) alleges the requirement for substantiation was unreasonable or reflected a failure to consider relevant material. Delta’s written submissions also add a new contention that the AEMC misunderstood its argument, namely that if its coal stockpile decreased below a set minimum target, it would operate as resource-constrained and conserve generation.
This new contention is rejected for the following reasons.
First, the AEMC did not misunderstand Delta’s argument. Delta’s original submission dated 6 December 2022, in the context of explaining its asserted constraints, stated that: “The minimum stockpile target is set based on Delta’s covenants with its financier, and Delta seeks to maintain the coal stockpile above this level”. The AEMC was accordingly correct to focus on the covenants.
Secondly, if Delta’s point is simply that it had a stockpile limit, or that it had a more profitable opportunity to use the coal after the APP, this would not be sufficient to establish a commercial limitation under the Guidelines. The AEMC was entitled to view the scarcity element as distinct from the foreclosure element (see Ground A1 above). The reference in [5.3.3] of the Guidelines to “commercial incentives or disincentives on using capacity or resources” requires more than simply a more profitable alternative opportunity. It requires something in the nature of “penalties”, as the Guidelines suggest.
As to Ground 2(c), Delta contends that because it made submissions which asserted that its minimum stockpile target was set based on financier covenants, the conclusion that this claim was not substantiated must mean the AEMC disregarded this material. This is misconceived. Delta’s assertions were not evidence. This was made clear in page 20 of the DOCM. For instance, Delta could have provided copies of its loan agreements containing relevant covenants to support its claims, but it did not. There was no error in the AEMC requiring substantiation, particularly when [5.3.3] of the Guidelines states: “The claimant will need to provide sufficient evidence justifying its claim in relation to the factors above”. Moreover, the Guidelines stated earlier on, in the section headed “How to apply for compensation”, that “to enable a claim for compensation to be assessed, the claimant must provide information to support its claim” and that the “responsibility for substantiating a claim for compensation, including the costs incurred, analysis and/or models, rests with the claimant”. It was not unreasonable for the AEMC to require substantiation even where the rules of evidence plainly did not apply.
Further, the attachments to Delta’s submissions and contemporaneous internal documents to which Delta refers did not provide evidence of the covenants or that the minimum stockpile limit was set by reference to such covenants.

Ground 3(a) alleges that the AEMC’s conclusion that it was unable to conclude that the APC caused the foreclosure of a profitable opportunity (based on “inconsistent” Delta submissions) failed to consider or misunderstood certain Delta material.
As to the allegation that the AEMC misunderstood Delta’s submissions, this is no more than a disagreement with the merits. The fact that it may have been open to conclude that Delta’s submissions were consistent does not gainsay that the opposite was equally open. Delta claimed in its 13 December 2022 submission that it would have preferred to generate at a lower level during the APP to conserve its coal for generating at future higher prices. By contrast, as noted above, its later submissions suggested that prices during the APP were sufficient to bid at normal generation levels. This raised at least a potential inconsistency, because the later submissions suggested that the price during the APP was sufficient to warrant Delta generating at the level it did, which left open the inference that it in fact produced at its preferred level. Faced with such a position, there was no error in the AEMC concluding that it could not be satisfied the APC caused foreclosure.
Delta points to further parts of its DOCM response and suggests that this demonstrates it provided evidence that, by having brought forward coal deliveries from July 2022 to June 2022, it lost the opportunity to generate more energy than it did in July 2022 when prices were higher. However, to prove that it forwent a valuable opportunity to use scarce resources after the APP, Delta would need to have shown that it produced more (i.e., used more of its coal) during the APP than it had wanted to. Delta’s draft response to the DOCM, which was emailed to Mr Butterworth on 10 October 2023 contained a table (Table 1) which records that Delta’s generation during the APP (when it asserts its resources were scarce) was around 81% to 87% of its generation in the two weeks before and after when the price was also higher. A second table (Table 2) records that Delta’s generation in July 2022 when its stockpile was below 100 kt (i.e., similarly low) was around 88% to 91% of its generation when the stockpile was above 100 kt. Rather than demonstrating that Delta generated more than it had wanted to during the APC, this data points in the opposite direction, namely that Delta produced what it wanted to or less. Thus, there is no illogicality in the AEMC concluding that it could not be satisfied based on Delta’s submissions that its generation behaviour would have been any different. In any event, Delta’s arguments appear to go to the merits of the AEMC’s analysis, which is beyond the scope of a legitimate judicial review.

In addition, it is well settled that the principle does not prevent a body from explaining to a judicial review court the basis for its impugned decision as well as addressing matters of power and procedure (see Hardiman at 36 and Bankstown City Radio Co-Operative Ltd v Australian Communications and Media Authority [2007] FCA 2053 at [5]–[6] per Sackville J).
It is also settled that where it is demonstrated that a decision-maker has not observed the Hardiman principle, that conduct does not of itself vitiate the impugned decision, but may affect any costs order which is ultimately made. The point is well illustrated by Schmidt AJ’s recent decision in Darley v City of Parramatta Council [2025] NSWSC 990. There, the Council engaged an external person to investigate and report on a complaint that a Councillor had breached the Council’s Code of Conduct. The Council acted upon a final report provided by the reviewer in which he recommended that the Councillor be censured. The Court upheld the Councillor’s judicial review challenge finding that the reviewer’s report was invalid. Moreover, apprehended bias on the part of the reviewer was established and it was held that other reviewable errors had been made by the Council’s General Manager and its Complaints Co-Ordinator. It was also held that the Councillor had been denied procedural fairness.
The Council actively defended not only the actions of the reviewer (who was separately represented), but also the actions of its Complaints Co-Ordinator and General Manager, as well as conducting an active defence of its own censure decision.
In concluding that the Council had departed from the Hardiman principle, notwithstanding that the Council was not dealing with an inter partes dispute, Schmidt AJ held that the Council should not have adopted such a defensive role, especially where the impugned decision concerned complaints made by Councillors against another Councillor (at [51]). Her Honour said that the Council had not confined itself only to arguments of law and the course it adopted “risked endangering the impartiality which the Act expects Councils to maintain when considering such a complaint in accordance with its code of conduct” (at [52]).
Acting Justice Schmidt distinguished McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504; [2008] NSWCA 209, where another Council’s active role in defence of its Councillors and officers was found not to breach the Hardiman principle having regard to the allegations of improper conduct made in that case (see at [226] per Basten JA, Campbell JA agreeing).
Delta’s complaint that the AEMC had not observed the Hardiman principle in the present proceeding focused on two particular aspects of its conduct. First, its conduct preceding the trial hearing when it successfully sought to set aside Notices to Produce issued by Delta and, secondly, the cross-examination of Delta’s only witness, Mr Aulbury.
As to the first of those matters, in her reasons for decision in Sunset Power International Pty Ltd v Australian Energy Market Commission (Supreme Court (NSW), Registrar Hedge, 5 June 2025, unrep), Registrar Hedge noted at [25] that, in a judicial review challenge, the usual course is to place before the Court material which was before the decision-maker. She noted that the AEMC had produced to Delta the documents that were considered by the two Commissioners responsible for the Final Report regarding Delta’s claim for compensation (with redactions for privilege and irrelevant content). Delta’s demand that it be provided with documents between the AEMC and Synergies Economic Consulting was regarded as being too broad and were in effect an attempt to obtain discovery for which leave had neither been sought nor granted. Registrar Hedge held that Delta was not entitled to be provided with other Synergies’ documents provided to AEMC staff but which were not included in the material before the two Commissioners. Accordingly, the AEMC succeeded in having three Notices to Produce issued by Delta set aside and was awarded costs of its amended notice of motion.
The AEMC’s conduct does not offend the Hardiman principle. In the absence of an active contradictor, the impartiality expected of a body such as the AEMC is generally not tainted by taking active steps to limit the production of documents to those which are properly admissible in a judicial review proceeding.
As to the second matter, I consider that the AEMC’s cross-examination of Mr Aulbury was appropriate in the particular circumstances. His evidence was relied upon by Delta in support of its complaint of procedural unfairness. In its very terms, that complaint relates to the AEMC’s procedures and its duty to ensure that Delta was informed of the primary issues affecting its assessment of the compensation claim.
An important part of Delta’s procedural unfairness case was based on Mr Aulbury’s evidence as to what he was told at several meetings with AEMC representatives and, in particular, whether he was told that the AEMC was interested in Delta’s attempts to restore its coal stockpiles post the APP itself and extending into July. Having regard to Delta’s claims of procedural unfairness and the controversy relating to their factual underpinning, it was appropriate for the AEMC to provide a different version of events in the form of the affidavit affirmed by Mr Butterworth and to cross-examine Mr Aulbury in order to test the strength of his evidence as to what was said at the various meetings. It is also notable that Mr Butterworth’s affidavit was provided following the making of orders by consent which contemplated the provision of such evidence by the AEMC.
I consider that the following additional matters indicate that the AEMC performed a measured and appropriate role as contradictor:

Delta Power & Energy (Vales Point) Pty Ltd ACN 162 696 335 v Australian Energy Market Commission

At a glance

Court

Decision date

Before

Catchwords

Source

Email me a plain-English summary of this case

Catchwords

Judgment

JUDGMENT

Key issues

Background facts further summarised

NEM Legislative and regulatory scheme summarised

(a) The National Electricity Law

(b) Compensation under the Rules and Guidelines

The AEMC’s reasons for decision summarised

Consideration and determination

(a) What is the legal status of the Guidelines and how does that affect construction?

(b) Alleged misunderstanding of the AEMC’s task (Ground A1)

(c) Alleged errors concerning technical limitation (Ground 1)

(i) Did the AEMC ask the wrong question or misunderstand the law?

(ii) Was Delta denied procedural fairness?

(iii) Was the AEMC’s finding that Delta had demonstrated no technical limitation illogical or made without regard to relevant material

(d) Alleged errors regarding commercial limitation (Ground 2)

(i) Complaint regarding the AEMC’s finding that Delta’s purchases on the spot market did not constitute a commercial limitation

(ii) Complaint about Delta’s failure to substantiate covenants

*(e) Challenge to the AEMC**’s analysis of the second question (Ground 3)*

(i) Delta’s inconsistent submissions

Consideration

(ii) The AEMC’s finding that even if there was a scarcity of coal supplies during the APC Delta increased its coal stockpile during and after the APP

Consideration

(f) Recovery of costs incurred by the AEMC

Has the AEMC breached the Hardiman principle?

Conclusion

Parties

Legislation Cited (12)

Cases Cited (17)

Delta Power & Energy (Vales Point) Pty Ltd ACN 162 696 335 v Australian Energy Market Commission

At a glance

Court

Decision date

Before

Catchwords

Source

Email me a plain-English summary of this case

Catchwords

Judgment

JUDGMENT

Key issues

Background facts further summarised

NEM Legislative and regulatory scheme summarised

(a) The National Electricity Law

(b) Compensation under the Rules and Guidelines

The AEMC’s reasons for decision summarised

Consideration and determination

(a) What is the legal status of the Guidelines and how does that affect construction?

(b*) Alleged misunderstanding of* the AEMC’s task (Ground A1)

(c) Alleged errors concerning technical limitation (Ground 1)

(i) Did the AEMC ask the wrong question or misunderstand the law?

(ii) Was Delta denied procedural fairness?

(iii) Was the AEMC’s finding that Delta had demonstrated no technical limitation illogical or made without regard to relevant material

(d) Alleged errors regarding commercial limitation (Ground 2)

(i) Complaint regarding the AEMC’s finding that Delta’s purchases on the spot market did not constitute a commercial limitation

(ii) Complaint about Delta’s failure to substantiate covenants

(e) Challenge to the AEMC*’s analysis of the second question (Ground 3)*

(i) Delta’s inconsistent submissions

Consideration

(ii) The AEMC’s finding that even if there was a scarcity of coal supplies during the APC Delta increased its coal stockpile during and after the APP

Consideration

(f) Recovery of costs incurred by the AEMC

Has the AEMC breached the Hardiman principle?

Conclusion

Parties

Legislation Cited (12)

Cases Cited (17)

(b) Alleged misunderstanding of the AEMC’s task (Ground A1)

*(e) Challenge to the AEMC**’s analysis of the second question (Ground 3)*