Braemar Power Project Pty Ltd v The Chief Executive, Department of Mines and Energy in his Capacity as the Regulator Under the Electricity Act 1994 (Qld) [2008] QSC 241

SUPREME COURT OF QUEENSLAND CITATION: Braemar Power Project Pty Ltd v The Chief Executive, Department of Mines and Energy in his Capacity as the Regulator Under the Electricity Act 1994 (Qld) [2008] QSC 241 PARTIES: BRAEMAR POWER PROJECT PTY LTD (ABN 44 117 443 035) Applicant V THE CHIEF EXECUTIVE, DEPARTMENT OF MINES AND ENERGY IN HIS CAPACITY AS THE REGULATOR UNDER THE ELECTRICITY ACT 1994 (QLD) Respondent FILE NO/S: BS11789/07 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court Brisbane DELIVERED ON: 15 October 2008 DELIVERED AT: Brisbane HEARING DATE: 8 September 2008 JUDGE: McMurdo J ORDER: The decision of the respondent to fix the annual Queensland Usage Factors for the 2007-2008 year for the south west transmission zone will be set aside and the respondent will be ordered to fix the annual QUFs for that year according to law. CATCHWORDS: ADMINISTRATIVE LAW – REVIEWABLE DECISIONS AND CONDUCT – DECISISON TO WHICH JUDICIAL REVIEW LEGISLATION APPLIES – Decisions of an administrative character – Whether a decision of the Chief Executive of the Department of Mines and Energy to set a “Queensland Usage Factor” (QUF) relevant to the provision of incentives to produce gas-fired power was a decision of an administrative or legislative character ADMINISTRATIVE LAW – GROUNDS OF REVIEW – RELEVANT CONSIDERATIONS – Whether the effect of the drought was a relevant consideration in setting the QUFs -- 1 of 16 -- 2 Commonwealth v Grunseit (1943) 67 CLR 58 Federal Airports Corporation v Aerolineas Argentinas (1997) 76 FCR 582 Griffith University v Tang (2005) 221 CLR 99 Hamblin v Duffy (1981) 34 ALR 333 JW Hampton & Co v United States of America (1928) 276 US 394 Kioa v West (1985) 159 CLR 550 Minister for Industry and Commerce v Tooheys Ltd (1982) 42 ALR 260 Queensland Medical Laboratory & Ors v Blewett & Ors (1988) 84 ALR 615 RG Capital Radio Ltd v Australian Broadcasting Authority (2001) 185 ALR 573, (2001) FCR 185. Roche Products Pty Ltd v National Drugs and Poisons Schedule Committee (2007) 163 FCR 451 Salemi v MacKellar (No 2) (1977) 137 CLR 396 SAT FM Pty Ltd v Australian Broadcasting Authority (1997) 75 FCR 604 Visa International Service Association v Reserve Bank of Australia (2003) 131 FCR 300 Electricity Act 1994 (Qld), Chapter 5A, s 135A, s 135AA(5), s 135CC, s 135CM, s 135CP, s 135CQ Judicial Review Act 1991 (Qld), s 4, s 23(f), s 23(g) COUNSEL: Dr M Spry for the applicant Mr P Flanagan SC with Mr M Plunkett for the respondent SOLICITORS: Minter Ellison for the Applicant Crown Law for the respondent [1] The applicant, which I will call “Braemar”, owns Braemar Power Station, near Chinchilla. It is a gas-fired power station, so that Braemar benefits from the so-called “13% gas scheme” under Chapter 5A of the Electricity Act 1994 (Qld), which I will call the scheme. In particular, Braemar is entitled under the scheme to create gas electricity certificates, or “GECs”, which can be sold and have a substantial value. -- 2 of 16 -- 3 [2] The extent to which an accredited generator such as Braemar is entitled to GECs depends upon, amongst other things, what is called the power station’s “annual QUF”. That is a figure which is fixed year by year by the respondent, the Chief Executive of the Department of Mines and Energy as the defined1 “regulator” under this Act. On 21 September 2007 the respondent purported to fix Braemar’s annual QUF for the year ending 30 June 2008. [3] Braemar claims that the respondent should have fixed the QUF at a higher figure, in which case Braemar would be entitled to a higher number of GECs. It is unnecessary to quantify the impact in monetary terms but on any view the difference is substantial. [4] Braemar applies for relief under the Judicial Review Act 1991 (Qld). Its claim is defended on two grounds. First it is argued that the respondent’s decision is not reviewable, because it is said to be not a decision of an administrative character but of a legislative character. Alternatively, it is argued that no ground for review is established. The scheme [5] The object of the scheme is to promote the use of gas in the generation of electricity. Section 135A provides that the main purposes of Chapter 5A are to reduce the growth in greenhouse gases, contribute to the diversification “of the State’s energy mix towards the greater use of gas in electricity generation” and “to encourage the development of new gas sources and gas infrastructure to meet the State’s future energy requirements”. Those purposes are to be achieved by a scheme under which accredited generators which use gas to generate electricity (such as Braemar) can create GECs which they can sell (or mortgage)2 , and those who are defined as “liable persons”, most of whom are retailers of electricity in Queensland, must buy GECs and surrender them to the regulator. A GEC is created for each megawatt hour of “eligible gas-fired electricity” generated by a power station.3 Liable persons must surrender the number of GECs that, generally speaking, equates to 13 per cent of the electricity sold or used by them in each year. By s 135AA(5) it is stated to be: “Parliament’s expectation that income earned from the sale of GECs will help gas fired electricity to compete with electricity generated from other more greenhouse-intensive energy sources.” [6] If a power station’s “nameplate capacity” is more than 500 megawatts, ordinarily the amount of its eligible gas-fired electricity is calculated by the formula set out in s 135CC. If the nameplate capacity is less than 500 megawatts, the amount of eligible gas-fired electricity may be prescribed by regulation or absent such a regulation, the regulator may approve a method for working it out.4 But if there is 1 By s 62 of the Act. 2 s 135AT. 3 s 135AA(3)(a). 4 s 135CI. -- 3 of 16 -- 4 no method so prescribed or approved, it is calculated by the formula in s 135CC. Braemar’s nameplate capacity is 450 megawatts, but there has been no regulation or method approved by the regulator. Accordingly, as is common ground, Braemar’s eligible electricity is worked out by the formula under s 135CC, which is as follows: “EE = (SO Gen x % EF x QUF x LF) – BL Where – EE is the eligible gas-fired electricity, measured in MWh [megawatt hours]. SO GEN is electricity sent out from the power station, less electricity imported into the power station, measured in MWh. %EF is the proportion of electricity generated from an eligible fuel. QUF is the power station’s annual QUF. LF is the power station’s annual loss factor. BL is the baseline for the baseline customer of the power station.” [7] The “baseline” represents the amount of gas-fired electricity generated as at a certain date (24 May 2000), so that the formula has the result that GECs are earned only on the amount by which a power station’s generation of electricity has increased from that date. [8] The term QUF stands for Queensland Usage Factor. There is a national electricity grid covering all States (save for Western Australia) and Braemar Power Station is connected to that grid. Under the scheme, an accredited generator becomes entitled to GECs only for its electricity which is used in Queensland. Accordingly, under the formula in s 135CC the eligible gas-fired electricity of a power station is also a function of the proportion of electricity sent out from the power station which will be used for Queensland’s electricity load. [9] A power station’s annual QUF is determined by the Chief Executive as the regulator pursuant to s 135CM, which provides as follows: “135CM Annual QUFs (1) Subject to section 135CP, the regulator must, for each financial year during which a power station is accredited, fix an estimated proportion of electricity sent out from the power station that will be used during that year for the State’s electricity load and not the electricity load of any other State. (2) The estimated proportion is the power station’s annual QUF. (3) The annual QUF must be fixed by gazette notice. (4) Until the notice is gazetted, the last annual QUF fixed for the power station continues to apply.” [10] This is qualified by s 135CP(1), which provides that the same annual QUF must be fixed for each power station which is connected to the national grid and which -- 4 of 16 -- 5 supplies electricity into the same transmission grid or supply network within the same transmission zone. [11] The Act permits a regulation to prescribe areas as transmissions zones.5 The Braemar Power Station is within the prescribed south west transmission zone. There are seven power stations within that zone, of which three are gas-fired power stations. The total of the nameplate capacities for those seven power stations is 4250.4 megawatts, of which Tarong and Tarong North power stations together account for 1843 megawatts. That large contribution by Tarong and Tarong North is significant for the present case as I will discuss. [12] By s 135CQ, it is provided that in fixing an annual QUF, the regulator may fix a “different proportion for different periods”. It is common ground that this permits the regulator to fix a different QUF for different parts of a day, and in particular for “peak” and “off-peak” periods, as was done in the present case. [13] In the Queensland Government Gazette published on 21 September 2007, the respondent gave notice that the annual QUF which would apply to the Braemar Power Station for the financial year 2007-2008 would be 0.7598 as the peak QUF 6 and 0.6622 as the off-peak QUF7 . Within the same Gazette, the respondent published notifications in identical terms for the other gas-fired power stations within the south west zone. [14] Section 135CP further provides as follows: “… (3) In fixing the annual and baseline QUF, the regulator must consider each of the following matters – (a) the electricity generated within the transmission zone; (b) the electricity imported into the transmission zone; (c) electricity sent out of the transmission zone and the relevant annual or baseline QUFs of the transmission zones to which it is initially sent out; (d) the electricity load and losses within the transmission zone; (e) whether end users in the transmission zone are located in the State or another State. (4) In considering the matters for fixing the annual QUF, the regulator must use estimates or forecasts of relevant data for the next financial year. (5) However, the regulator may use data for the previous financial year if – (a) the estimates or forecasts are not available to the regulator; or 5 s 135CO. 6 To apply from 7.00am to 10.00pm on working week days. 7 Applying for other hours. -- 5 of 16 -- 6 (b) the regulator considers the estimates or forecasts are inconsistent with the basis on which the transmission zone was prescribed.” [15] In this case the respondent purported to fix the QUFs by using estimates or forecasts, rather than data for the previous year. In particular he used forecasts provided by the company which operates the national electricity market, which is National Electricity Market Management Company Limited or “NEMMCO”. [16] NEMMCO engaged Roam Consulting Pty Ltd to provide data relevant to the fixing of QUFs for the 2007-2008 year. In May 2007 its report to NEMMCO was passed on to the Department of Mines and Energy. From that material an engineer then employed by the Department made calculations resulting in proposed QUFs for the south west transmission zone which represented a substantial reduction from the QUFs for that zone for the 2006-2007 year. The reduction was due to the expected impact of a new power station, a coal-fired station called Kogan Creek, which would have a nameplate capacity of 750 megawatts. All other things being equal, the extra electricity generated by this power station would be expected to result in an increase in the proportion of electricity generated within the zone which would be used outside Queensland, so that the annual QUFs would be relatively smaller. [17] However, Braemar says that there was a countervailing factor, which was that the drought was reducing the output of the Tarong and Tarong North power stations. On Braemar’s case, the overall forecast should have been for a net reduction in capacity and consequently in the generation of electricity within the zone, with the result that relatively less electricity would be exported from the zone and from Queensland, thereby warranting an increase in the annual QUFs. [18] It seems to be undisputed that the drought was having a substantial impact upon the output of Tarong and Tarong North, when the QUFs were fixed on 21 September 2007, and that those who were involved in calculating the QUFs were well aware of that. [19] In essence Braemar’s case is that the respondent disregarded the impact of the drought when forecasting the electricity which would be generated within the zone and in thereby fixing the annual QUFs, and that this was an error which provides various grounds for review under the Judicial Review Act. In particular it argues that the respondent disregarded a matter which he was required to consider, that he applied a policy without regard to the particular circumstances of the case and that his decision was unreasonable in the Wednesbury sense. Braemar further argues that the respondent was obliged to provide natural justice, and in particular to provide Braemar with some opportunity to be heard. Before going to those arguments it is necessary to discuss the respondent’s argument that the fixing of a QUF is not a decision of an administrative character. -- 6 of 16 -- 7 Decision of an administrative character [20] The relief claimed by Braemar can be granted only if the respondent’s decision is “a decision to which the [Judicial Review Act] applies”, so that according to s 4, it must be a decision “of an administrative character”. In Griffith University v Tang8 , Gummow, Callinan and Heydon JJ said of this expression:9 “The second element of the definition to which attention is given by the case law is the expression ‘of an administrative character’. The evident purpose here is the exclusion of decisions of a ‘legislative’ or ‘judicial’ character. The instability of the distinctions which the statute thus preserves may be appreciated by regard to two Federal Court decisions. In Queensland Medical Laboratory v Blewett, a ministerial decision which took effect by substituting a new table of fees for the table set out in a Schedule to the Health Insurance Act 1973 (Cth) was held to have a legislative rather than an administrative character. Thereafter, in Federal Airports Corporation v Aerolineas Argentinas, a determination by the Corporation in exercise of power conferred by the Federal Airports Corporation Act 1986 (Cth) to make determinations fixing aeronautical charges and specifying those by whom, and the times at which, the charges were due and payable was held to have an administrative rather than legislative character.” [footnotes omitted] [21] In seeking to apply this “unstable” distinction between administrative and legislative decisions, courts have identified factors which, depending upon the particular statute, may provide varying levels of indication of the character of the decision, but without being definitive. Each of the arguments here addressed the factors listed in Aronson, Dyer and Groves, Judicial Review of Administrative Action10, which are whether the decision: (i) creates new rules of general application, rather than applies existing rules to particular cases; (ii) must be publicly notified in the Gazette or similar publication; (iii) cannot be made until there has been wide public consultation; (iv) incorporates or has regard to wide policy considerations; (v) can be varied or amended unilaterally by its maker, the analogy being to primary legislation; (vi) cannot be varied or amended by the Executive; (vii) is not subject to merits review in a tribunal such as the AAT; 8 (2005) 221 CLR 99. 9 (2005) 221 CLR 99 at 123. 10 2004 (3 rd Ed), Lawbook Co, Pyrmont at 69-70. -- 7 of 16 -- 8 (viii) can be reviewed in parliament (for example, it is a disallowable instrument); (ix) triggers the operation of other legislative provisions; and (x) has an effect which is binding. As the authors state, that list is “a composite mixture of summary and quotation” derived from these decisions of the Federal Court:11 SAT FM Pty Ltd v Australian Broadcasting Authority,12 RG Capital Radio Ltd v Australian Broadcasting Authority;13 and Visa International Service Association v Reserve Bank of Australia;14 see also Roche Products Pty Ltd v National Drugs and Poisons Schedule Committee.15 [22] In Minister for Industry and Commerce v Tooheys Ltd,16 Bowen CJ, Northrop and Lockhart JJ said:17 “The distinction between legislative and administrative acts is referred to in many cases. It is unnecessary to discuss them in detail. The distinction is essentially between the creation or formulation of new rules of law having general application and the application of those general rules to particular cases: Commonwealth v Grunseit (1943) 67 CLR 58; Hamblin v Duffy (1981) 34 ALR 333 and de Smith’s Judicial Review of Administrative Action 4th ed, p 71. In Commonwealth v Grunseit, Latham CJ expressed the distinction in these terms (at 82-3): ‘The general distinction between legislation and the execution of legislation is that legislation determines the content of a law as a rule of conduct or a declaration as to power, right or duty, whereas executive authority applies the law in particular cases.’ ” However, in Queensland Medical Laboratory & Ors v Blewett & Ors,18 Gummow J doubted that the distinction between “the creation or formulation of new rules of law having general application and the application of those general rules to particular cases” was a sufficient distinction; in his view the acceptance of the proposition expressed by Latham CJ in Commonwealth v Grunseit “is not necessarily to accept the further proposition that to qualify as a law, a norm must formulate a rule of general application”.19 11 On the corresponding term in s 3(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth). 12 (1997) 75 FCR 604. 13 (2001) 185 ALR 573, (2001) FCR 185. 14 (2003) 131 FCR 300. 15 (2007) 163 FCR 451. 16 (1982) 42 ALR 260. 17 (1982) 42 ALR 260 at 265. 18 (1988) 84 ALR 615. 19 (1988) 84 ALR 615 at 635. -- 8 of 16 -- 9 [23] Referring to those statements by Gummow J in Queensland Medical Laboratories v Blewett, Lehane J (with whom Beaumont and Whitlam JJ agreed) said in Federal Airports Corporation v Aerolineas Argentinas:20 “If there is anything that the authorities make plain – and Blewett is no exception - it is that general tests will frequently provide no clear answer. It is, after all, not difficult to point to authority which supports the proposition that a decision which imposes obligations and is of general operation may nevertheless be administrative or executive: thus, Mason J, said in Kioa v West (1985) 159 CLR 550 at 584: ‘But the duty does not attach to every decision of an administrative character. Many such decisions do not affect the rights, interests and expectations of the individual citizen in a direct and immediate way. Thus a decision to impose a rate or a decision to impose a general charge for services rendered to ratepayers, each of which indirectly affects the rights, interests or expectations of citizens generally does not attract this duty to act fairly.’ Deane J (at 632), refers to the same distinction between those administrative decisions which affect the rights of a person in an individual capacity and those which affect a person as a member of the general public or of a class of the general public. See also the judgment of Jacobs J in Salemi v MacKellar (No 2) (1977) 137 CLR 396 at 452, quoted by Mason J in Kioa. There is no escape, in my view, from the need to examine closely the particular provisions and the particular circumstances.” [24] The respondent argues that a fixing of a QUF is a decision of the legislative character because: (a) it is said to be a formulation of a new rule of general application “rather than applying existing rules to a particular case”; (b) it must be publicly notified in the Gazette; (c) it is said to incorporate or have regard to wide policy considerations; (d) a QUF cannot be amended for the year for which it is made; (e) a QUF “cannot be varied or amended by the Government as a whole”; (f) the decision is not subject to a merits review in any tribunal; (g) the decision has a binding effect. 20 (1997) 76 FCR 582 at 591. -- 9 of 16 -- 10 Most of those matters accurately describe the decision to fix a QUF. However it is wrong to characterise this decision as one which “incorporates or has regard to wide policy considerations”. Section 135CM requires the regulator to make a prediction: to estimate the proportion of electricity that will be sent out from the power station that will be used in Queensland. The regulator must consider the matters listed in s 135CP(3) in making that estimate and he must otherwise act according to the section. But this does not require the regulator to have regard to wide policy considerations. Rather, it is largely a mathematical exercise, in which the regulator must assess what is likely to happen. He is not required to determine how much of a power station’s output ought to be for use in Queensland. Nor is the regulator required to assess the extent to which a power station’s output should entitle it to GECs. That has been determined by the Parliament. In making the decision, the regulator must keep in mind the objects of the Act; but that is not to say that the regulator is to himself formulate policies or standards. So, quite contrary to this submission, it is the absence of policy considerations in fixing a QUF which strongly indicates that it is not a decision of a legislative character. The regulator has a discretion in fixing a QUF, because he is required to arrive at an estimate, rather than to find an existing fact. But this is a discretion as to the execution of a law rather than a discretion to decide what the law shall be 21 . Related to this is the fact that the regulator is not required to engage in any public consultation. [25] The respondent points to a number of provisions in the Act which provide rights of review of the exercise of other powers and argues that the absence of such a provision for this power indicates that it is of a legislative character. The existence of a right of review upon the merits can be a relevant factor, but the absence of such a right in this case provides no substantial indication of the nature of the decision. [26] The respondent argues that the fixing of the QUF has a general application which thereby indicates its legislative character. Undoubtedly it is general in the sense that, as s 135CP requires, the same annual QUF must be fixed for each power station in the same transmission group or supply network within the same transmission zone. But as appears from the above passage from Federal Airports Corporation v Aerolineas Argentinas, decisions which are of general operation may nevertheless be administrative. [27] The respondent further argues that the fixing of the QUF “affects the price of a GEC which in turn affects the price of electricity available for sale in the national market.” That argument cannot be accepted. The fixing of the QUF affects the extent of the entitlement to GECs from a certain level of electricity generation at a power station, and in that sense it might be thought to affect the “price” of a GEC to the accredited generator. It may be that the practical consequences are then to affect the price of GECs to liable persons, and in some way, the price of electricity for sale on the national market. But that is not the legal consequence of this decision and it cannot be fairly characterised as a decision which affects a price of some product which is generally available, as the argument attempts to characterise it, apparently in order to liken it to Queensland Medical Laboratories v Blewett. 21 See JW Hampton & Co v United States of America (1928) 276 US 394, cited by Sundberg J in SAT FM v Australian Broadcasting Authority (1997) 75 FCR 604 at 608. -- 10 of 16 -- 11 [28] In my conclusion this is a decision of an administrative character. Was the drought considered? [29] The respondent gave a statement of reasons which, I accept, accurately sets out the steps which resulted in his decision. According to that, NEMMCO supplied the Department with forecasts of relevant data, using information compiled by NEMMCO in November 2006. It is NEMMCO’s practice to compile such information each November and the Department’s practice to rely upon NEMMCO for it. The information provided by NEMMCO was checked by an engineer employed by the Department, and as some anomalies were identified, NEMMCO was asked to review the information which it did by providing revised forecasts to the Department. [30] NEMMCO’s forecasts took into account the increased capacity from the introduction of the Kogan Creek power station, “but did not take the impact of the drought [on the generation capacity of] the Tarong and Tarong North power stations into account”, an impact which “became apparent in approximately mid-2007”.22 [31] The Department had previously adopted a methodology for the calculation of annual QUFs which was contained in a document called Departmental Policy No. 13/01 (Queensland Usage Factors). I will call it, as those in the Department did, the QUF Policy. An employee of the Department applied that methodology to the revised forecasts of NEMMCO, which resulted in proposed annual QUFs for this zone being considerably lower than for the previous year, primarily because the forecasts took into account the expected effect of the new power station at Kogan Creek. [32] A group of Departmental officers was convened to review whether an appropriate alternative methodology could be developed to fix the annual QUFs which would take into account the impact of the drought on the Tarong and Tarong North power stations. After several meetings, the group recommended to the respondent that the Department’s “ordinary practice”23 should be followed, which, it was thought, would not take into account the effect of the drought. The respondent accepted this advice and on 12 September 2007 decided that the proposed QUFs had been calculated according to the usual methodology. They became the QUFs which were fixed by notice in the Gazette on 21 September 2007. [33] According to the Statement of Reasons then, it is plain that the respondent fixed the QUFs without regard to the impact of the drought, which had become apparent in about mid-2007. [34] The advice to the respondent is contained in a briefing note dated 3 September 2007. That document made it clear that the NEMMCO data was compiled in 22 Statement of Reasons paragraph 13. 23 As it was described in the Statement of Reasons paragraph 14. -- 11 of 16 -- 12 November 2006 and before the impact of the drought was known. But the authors wrote: “While the inclusion of the changed circumstances at Tarong and Tarong North may have altered the 2007-08 QUFs, the calculation of the QUFs follows the method published in the QUF Policy. The QUF Policy clearly indicates the particular data to be used to calculate the QUFs for the zones. The QUF Policy is also a general policy, designed to provide a clear method to calculate QUFs. It is not recommended that the policy be changed to try to reflect any specific circumstances.” [35] Braemar argues that the respondent improperly exercised the power because, in terms of s 23(f) of the Judicial Review Act, he exercised a discretionary power in accordance with a rule or policy, specifically the QUF policy, without regard to the merits of the particular case. From that passage from the briefing note, if read alone, that appears to be so. However, on closer examination, it appears that the QUF Policy was not applied. [36] According to the QUF policy, an annual QUF was to be calculated according to certain formulae and assumptions, which differed from one transmission zone to another. It is unnecessary to set out the formula for the south west zone here. It is sufficient to say that one factor in the calculation is the expected generation of electricity within the zone. The higher the number attributed to that factor, the lower would be the annual QUF calculated according to the formula. This is simply because as the output within the zone increases, a higher proportion of the electricity generated is exported from the zone, and as some of that is exported to New South Wales, a higher proportion of the total output would be used outside Queensland. In this respect the formula was consistent with s 135CP(3)(a). Indeed I did not understand Braemar to contend that in any respect was the formula inconsistent with the Act. Braemar’s real complaint is that the wrong number was used for this factor: the expected amount of generation within the zone. By the time the formula was applied, it was known that NEMMCO’s estimate for this factor was out of date, because it was prepared prior to the impact of the drought. The application of the QUF Policy would have involved the used figure which was the then expected generation within the zone. [37] Within the briefing note is a summary of a “desktop analysis of the available data”, which was said to suggest “that recalculating QUFs to account for drought impacts would increase the (south west) QUFs”. The analysis itself is set out in another document disclosed by the respondent. As appears from that document, this analysis is not precisely according to the formula ordinarily used. But the analysis is significant, firstly because it shows the extent of the fall in generation within the south west zone which was apparently due to the drought. It did this by comparing actual production figures, converted to an average hourly output, between two periods: the 12 months ending 31 March 2007 and the period of 107 days from 1 April to 16 July 2007. The total generation within the zone, measured as an output per hour, fell during peak periods by 22 per cent and during off peak periods -- 12 of 16 -- 13 by 29 per cent. The analysis also referred to actual data for what was described as the QNI Flow, which is the amount of electricity exported from the south west zone to New South Wales. A comparison of those two periods showed a 28 per cent fall in the QNI during peak hours and a 38 per cent fall during off peak hours. Upon this analysis, the Department’s proposed QUFs were too low. By this analysis, the peak QUF would be 0.80 to 0.83 rather than the proposed 0.7598, and the off peak QUF would be 0.81 rather than the proposed 0.6622. [38] This analysis was necessarily imprecise, because the information as to other relevant factors for these two periods was incomplete. In particular the author did not have actual figures for electricity imported into the south west zone from Central Queensland. Nevertheless the analysis demonstrated that there had been a significant fall in the generation of electricity from the end of March to mid-July 2007 which was attributable to the drought. Accordingly, as the drought had not broken, it was clear that there must have been a commensurate impact upon the level of generation within the zone, and the export of electricity from the zone to New South Wales, from 1 July 2007 to that point in September. In other words, with almost one quarter of the relevant year gone, it was clear enough that the application of the formula in the QUF Policy to the NEMMCO forecasts would result in QUFs, which were too low. Of course the future duration of the drought was not known. But the briefing note demonstrated, or should have demonstrated, to the respondent that the impact of the drought would be substantial rather than negligible. [39] Having referred to that desktop analysis, the authors of the briefing note made these points (amongst others): “However: we should not change or update the 2007-08 QUFs or any future QUFs Changing the method would set a precedent for future years The current method is established, relies on published policy and on 3rd party data, and would be more defendable Any new method would involve decisions being made by DME [Department of Mines & Energy] DME would then be in control of QUF values rather than a 3rd party o decide in what circumstances the QUFs should be re- calculated o decide if the extent of the potential change justifies the re- calculation o decide if QUFs should be re-calculated when power stations would be worse off and we have not yet published the QUFs -- 13 of 16 -- 14 o decide if a mix of methods for calculating QUFs is acceptable if we decide against using new QUFs that make a power station worse off Rain in November and December for Boondooma Dam? The data for the 2008-09 QUFs will include some drought impacts; NEMMCO will be forecasting less energy being sent out form the SEQ power stations The QUFs are a forecast, and reality will always be different A recalculation would cost more than $20,000 (the current QUF cost)”. [40] The Department had explored the possibility of having NEMMCO prepare fresh estimates. In May 2007 an officer from the Department asked NEMMCO whether “the Queensland drought-affected generators were catered for in the information provided by ROAM [the consultants engaged by NEMMCO]?” NEMMCO’s reply was that they were not, and that “if you want [to] include the effect of generation limitations due to the drought in the calculation, then the whole process would need to be repeated.” The Department’s officer replied on 31 May, saying that the regulator would decide whether to have NEMMCO provide that new information. That officer emailed her superior the following day about whether to ask for those renewed forecasts, saying this: “Upon review, the QUF policy (attached) is fairly specific on the underlying assumptions and calculations to be undertaken ... Consequently I would suggest that we use the currently provided NEMMCO data set, as this would provide the most defensible position. Any deviation from the prescribed policy is likely to be viewed as highly contentious from a legal perspective, given the particularly sensitive nature of the QUF.” Consequently, the respondent was briefed with recommended QUFs based upon the “currently provided NEMMCO data set”, and nothing came of NEMMCO’s offer to provide forecasts which were up to date. [41] Some of the considerations set out in that extract from the briefing note would indicate that the relevant officers were inclined to the course which they believed could be most easily defended, rather than one which would involve the genuine estimate of the regulator which the Act required. Their point that QUFs “are a forecast, and reality will always be different” was valid in that for any year, there could be no single and correct estimate. But what was known by late September 2007 was that these estimates would be underestimates and by more than a negligible amount. And it was not relevant to consider that the QUFs for the following year, 2008-09, would include some drought impacts: what had to be estimated were the relevant figures for the 2007-08 year. Notably there was no -- 14 of 16 -- 15 suggestion that some other contingency might counter-balance the impact of the drought. Grounds for review [42] Section 135CP(4) required the respondent to use estimates or forecasts of relevant data for the year in question, which is an apparent reference to at least the data described in s 135CP(3). The respondent had such estimates or forecasts and used them. Accordingly, it is said on his behalf, he acted consistently with the Act and properly exercised his power. [43] The problem is however, that as he had been advised, those forecasts, and in particular the forecast of the electricity to be generated within the transmission zone 24 , had become out of date, and NEMMCO, which had provided them, had effectively said so. Historically, they had been estimates or forecasts of relevant data. But by the time of this decision, it was clear enough that they were not the estimates which NEMMCO would then have provided. [44] The estimates or forecasts referred to in s 135CP(4) must surely be estimates or forecasts which are current at the time of the regulator’s decision. That is not to say that estimates or forecasts furnished many months prior to the decision could not be current. But these were not current because they had been overtaken by events, and in particular the impact of the drought upon the largest generators in the zone. It follows that this decision was not made according to s 136CP(4). [45] The respondent did not purport to act under s 135CP(5), in that he did not use data from the financial year 2006-2007. Had he done so, he would have had the benefit of the data from 1 April 2007 which did indicate the impact of the drought. [46] Alternatively this was an improper exercise of the power in at least two ways. The first is that the respondent failed to take a relevant and necessary consideration into account, which was that the NEMMCO forecasts were out of date, having regard to what was the known impact of the drought by September 2007. Secondly, by fixing the QUFs in the face of advice that the reality of the drought would result in the QUFs being underestimates, the respondent exercised the power unreasonably in the sense of s 23(g) of the Judicial Review Act. [47] The effect of the drought over the entire year was, of course, a matter of some speculation. But that was no reason to ignore it entirely, especially when nearly three months of the year had passed. Current forecasts could have been procured from NEMMCO, upon varying hypotheses as to the duration of the drought. The impact of the drought from day to day upon Tarong and Tarong North was already known and able to be measured or at least approximated. 24 s 135CP(3)(a). -- 15 of 16 -- 16 [48] It follows that Braemar has established grounds for a statutory order of review. It is unnecessary then to consider the further submission that the respondent was obliged to provide natural justice, and in particular to give Braemar an opportunity to comment upon the then proposed QUFs. [49] An order which sets aside the respondent’s decision in relation to Braemar should also extend to the contemporaneous fixation of the same annual QUFs for other accredited generators in the zone. There was no submission by the respondent that that should not occur because of the interests of those other generators who are not parties to these proceedings. The other power stations concerned are Oakey, which is within the same corporate group as Braemar, and Daandine, the output of which is relatively very small. And the reconsideration of the decision should be favourable to them by increasing the QUFs for 2007-08. Conclusion [50] The decision of the respondent to fix the annual Queensland Usage Factors for the 2007-2008 year for the south west transmission zone will be set aside and the respondent will be ordered to fix the annual QUFs for that year according to law. I will hear the parties as to costs. -- 16 of 16 --