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

1. [1]

   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).

2. [2]

   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.

3. [3]

   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.

4. [4]

   These reasons are structured as follows:

5. [5]

   The key issues, broadly stated, are as follows:

6. [6]

   It is common ground that to succeed Delta must discharge its onus of establishing jurisdictional error or error of law on the face of the record.

7. [7]

   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.)

8. [8]

   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.

9. [9]

   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.

10. [10]

    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.

11. [11]

    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.

12. [12]

    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.

13. [13]

    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).

14. [14]

    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).

15. [15]

    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.

16. [16]

    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.

17. [17]

    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).

18. [18]

    Delta told the AEMC that it no longer pursued its claim for direct costs. It summarised its opportunity costs claims as follows (emphasis added):

19. [19]

    Delta identified its limitations during the APP as follows (emphasis in original):

20. [20]

    Footnote 5 stated that the operating minimum target “is the equivalent of about a month of full capacity production”. (It is common ground that although the minimum target was said at this point to be 250 kt, it was later clarified that the true target was 270 kt, which includes 20 kt at the bottom of the pile containing impurities and constituted wastage.)

21. [21]

    During the period between February 2023 and March 2024 there were several meetings between representatives of both Delta and the AEMC to discuss the claim.

22. [22]

    The AEMC also sought additional information from Delta on 11 July 2023, which Delta provided on 25 July 2023.

23. [23]

    On 14 September 2023, the AEMC released a ‘Draft Opportunity Cost Methodology’ consultation paper (DOCM). Delta responded to the DOCM with further evidence and submissions on 17 and 19 October 2023.

24. [24]

    It will be necessary to elaborate upon these matters later in these reasons for judgment.

25. [25]

    On 13 December 2023, the AEMC provided Delta with a copy of its draft decision. Delta responded to the draft decision with further evidence and submissions on 19 January 2024.

26. [26]

    As noted above, on 16 May 2024, the AEMC published its decision and supporting reasons for refusing Delta’s claims for compensation (Final Report). In brief, the AEMC found that Delta was not eligible for opportunity costs compensation because it did not demonstrate a technical limitation during the APP ([2.2.2] of the Final Report); it did not demonstrate a commercial limitation during the APP ([2.2.3]); and even if it could demonstrate either limitation, it did not forgo value from an alternative opportunity due to the application of the APC ([2.2.4]).

(a) The National Electricity Law

1. [27]

   In May 1996, New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory entered into the National Electricity Market Legislation Agreement, pursuant to which each jurisdiction agreed to enact a National Electricity Law, with South Australia as the lead jurisdiction. The National Electricity Law (NEL) is set out in a schedule to the National Electricity (South Australia) Act 1996 (SA) (SA Act) and applies as a law of South Australia by reason of s 6 of that Act.

2. [28]

   Section 6 of the National Electricity (New South Wales) Act 1997 (NSW) (NSW Act) provides that the NEL set out in the Schedule to the SA Act, as in force for the time being, applies as a law of New South Wales and, as so applying, may be referred to as the National Electricity (NSW) Law (NSW Law). Section 8 of the NSW Act provides that in the NSW Law the expression “Supreme Court” means this Court and “the National Electricity Law” or “this Law” means the NSW Law.

3. [29]

   Section 2(1) of the NSW Law defines the “National Electricity Rules” and the word “Rules” as, relevantly, “the initial National Electricity Rules” (that is, those made by the relevant minister administering the SA Act: see s 90 of the NSW Law) and “Rules made by the AEMC under this Law, including Rules that amend or revoke … the initial National Electricity Rules”. Provision is made in s 70 of the NSW Law for a person aggrieved by a decision of the AEMC under the Rules to apply for judicial review in this Court.

4. [30]

   In Australian Energy Regulator v Snowy Hydro Ltd (No 2) [2015] FCA 58 at [9]–[10], Beach J described the NEM as follows:

(b) Compensation under the Rules and Guidelines

1. [31]

   Clause 3.14.6(e) of the Rules requires the AEMC to publish guidelines for the making and assessment of claims for compensation. The relevant guidelines are the Guidelines dated October 2021.

2. [32]

   Clause 3.14.6(c) of the Rules states the objective of paying compensation relevantly as, “to maintain the incentive for: (1) Scheduled Generators … to supply energy; … during price limit events”.

3. [33]

   The amount of compensation payable in respect of a claim under cl 3.14.6 “must be based on direct costs and opportunity costs”: cl 3.14.6(d).

4. [34]

   Clause 3.14.6(e) requires the AEMC to publish guidelines consistent with cll 3.14.6(c) and 3.14.6(d) that (emphasis in original):

5. [35]

   Although the Guidelines must define the types of opportunity costs for which claims can be made, the Rules define the essential nature of such costs, being “the value of opportunities forgone by the claimant due to the price limit event as defined in the compensation guidelines”: cl 3.14.6(a).

6. [36]

   The process for making a claim is described in cll 3.14.6(h) and 3.14.6(i). In particular, “[a] person who is eligible under paragraph (b) may make a claim for compensation by providing the AEMC and AEMO with written notice of its claim in the form required by the compensation guidelines”: cl 3.14.6(h).

7. [37]

   The initial steps the AEMC must take upon receiving a claim for compensation are described in cll 3.14.6(j) to 3.14.6(k). The process by which the AEMC must determine a claim that is not a “direct cost only claim” (i.e., a claim that includes opportunity costs) is described in cll 3.14.6(o)–3.14.6(s) of the Rules as follows (emphasis in original):

8. [38]

   The AEMC emphasises the following two features of these provisions. First, the only express mandatory consideration that the AEMC must take into account under cl 3.14.6 are submissions received in response to its published DOCM: cl 3.14.6(s)(1). Secondly, in making its final decision, the AEMC must apply the Guidelines, unless there are compelling reasons not to do so. It is common ground that the AEMC purported to apply the Guidelines here.

9. [39]

   Paragraph 5.3 of the Guidelines concerns opportunity costs. It commences by stating that it “sets out the definition of opportunity cost, the criteria that the AEMC may consider in assessing a compensation claim for opportunity costs and the methods of valuing opportunity costs” (emphasis added). Thus, while the Guidelines describe the definition, and the methods for valuing, opportunity costs, the use of “may consider”, by reference to the criteria for assessing such costs, indicates that these criteria are neither exhaustive nor mandatory even when the Guidelines are applied.

10. [40]

    Paragraph 5.3.1 is important. It defines opportunity costs “[f]or the purposes of the compensation guidelines” as follows (emphasis added):

11. [41]

    Paragraph 5.3.2 is headed “Valuing opportunity costs”. It states that, to make a claim for opportunity costs, the claimant must:

12. [42]

    I see no reason why the “usual approach” should not apply so as to read the words of those definitions into the Guidelines themselves (see Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103] per McHugh J as applied to documents in addition to legislation, as to which see P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [3.40] and the need for caution in applying that approach inflexibly).

13. [43]

    Paragraph 5.3.3 is headed “Criteria for assessing whether opportunity costs can be claimed”. Despite their length, it is desirable to set out the relevant parts of the body of this provision (footnotes omitted):

14. [44]

    Paragraph 5.3.3 is important in considering Ground A1 and some of the other grounds. The AEMC contends that the clause identifies one necessary condition of opportunity costs arising (i.e., scarcity of capacity or resources). It claims, however, it does not identify a sufficient condition for identifying such costs. It submits that the second necessary condition involves showing the foreclosure of an opportunity to use such scarce capacity or resources more profitably due to the APC event. The AEMC’s position is that satisfaction of each of these conditions is sufficient to demonstrate opportunity costs.

15. [45]

    Paragraph 5.3.4 of the Guidelines is headed “Principles for selecting a method for valuation of opportunity costs” and identifies three potential valuation methodologies. The preferred methodology is a market-based valuation using a counterfactual based on “what would have occurred in the market had the claimant’s behaviour changed and it had chosen the more profitable alternative opportunity”.

16. [46]

    As noted above, one of the key issues is the legal status of the Guidelines. In brief, the AEMC contends that the Guidelines are not, and do not have the effect of, subordinate legislation. Although Delta initially shared that view, as the hearing of this proceeding progressed it changed its position and asserted that the Guidelines have the effect of delegated legislation (see further at [62] below).

17. [47]

    The reasons in the Final Report dated 16 May 2024 are relatively brief considering the volume of the documentary material generated during the decision-making process both internally and externally. This relative brevity is relied upon by Delta in support of its claims that the AEMC either misunderstood one or more questions which it had to address or determine, or it overlooked and/or misunderstood Delta’s position and supporting information.

18. [48]

    The AEMC emphasises, however, that Delta claimed confidentiality in respect of much of the material it provided to the AEMC, which material necessarily could only be referred to “in a general form” in the Final Report so as not to breach confidentiality requirements (see [1.2] and [1.3] of the Final Report).

19. [49]

    Paragraph 2.2 of the Final Report deals with Delta’s eligibility to claim compensation. The AEMC identified the following three questions regarding such eligibility:

20. [50]

    The controversy in the present proceeding largely focuses on the AEMC’s analysis and finding that the first question should be answered in the negative and, although it was strictly unnecessary for the AEMC to proceed to answer the second question, it did so and also answered it in the negative. Delta challenges the AEMC’s analysis and findings relating to both the first and second question.

21. [51]

    The AEMC’s position, as stated at [34] of its outline of written submissions, is that the first question reflects the criterion in [5.3.3] of the Guidelines, while the second question reflects both the definition of “opportunity costs” in cl 3.14.6(a) of the Rules and the more expansive definition of that concept in [5.3.1] of the Guidelines.

22. [52]

    As to Delta’s claimed technical limitation, the AEMC reasoned that Delta believed that its coal supply was or could soon be technically limited during the APP. But the AEMC then gave the following four reasons why it was not satisfied that Delta had demonstrated any such limitation:

23. [53]

    As to Delta’s claimed commercial limitation, the AEMC gave the following two reasons why it found that Delta had not demonstrated that it had incurred penalties or commercial disincentives on its available capacity or resources during or following the APP (at [2.2.3]):

24. [54]

    In [2.2.4] of the Final Report, the AEMC explained why it was not satisfied that Delta had foregone value from an alternative opportunity due to the application of the APC even if, contrary to the above, Delta had demonstrated the existence of a relevant technical limitation. The AEMC said that Delta would also have to demonstrate that it:

25. [55]

    The AEMC said that it found Delta’s submissions on this issue to be “inconsistent” and that it was not clear that Delta’s generation behaviour would have been different had the APC not applied. Its reasons are reflected in the following parts of [2.2.4] of the Final Report:

26. [56]

    Each of Delta’s grounds of judicial review raise in one way or another the proper construction of the Guidelines. Therefore, it is desirable to address that matter at the outset, with reference to the legal status of the Guidelines and the implications of that for the task of construction and reviewing the AEMC’s application of the Guidelines in this instance.

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

1. [57]

   After the issue was raised by the Court during oral address, the parties provided supplementary submissions on the legal status of the Guidelines. The AEMC pointed out that the NSW Law contains its own miscellaneous provisions relating to interpretation (see s 3 and Sch 2). The application of Sch 2 to the National Electricity Law, the Regulations or any other statutory instrument (other than the Rules) may be displaced, wholly or partly by the manifestation of a contrary intention in the NSW Law, the Regulations or that other statutory instrument (see Sch 2, cl 1(1)). Furthermore, the application of Sch 2 to the Rules (apart from particular specified clauses) may be displaced, wholly or partly, by a contrary intention appearing in the Rules (see Sch 2, cl 1(2)).

2. [58]

   The AEMC drew attention to the fact that the definitions in Sch 2, cl 10 of the NSW Law provide that “instrument includes a statutory instrument” and that “statutory instrument means the Regulations or an instrument made or in force under this Law” (emphasis in original). But reference also should be made to cl 41, which is included in Pt 9 of Sch 2 to the NSW Law, which is headed “Instruments under this Law”. Clause 41 provides (emphasis in original):

3. [59]

   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)).

4. [60]

   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.

5. [61]

   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).

6. [62]

   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).

7. [63]

   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.

8. [64]

   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.

9. [65]

   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):

10. [66]

    Another reason relates to the relationship between the Rules (which plainly do have a legislative status) and the Guidelines. The AEMC acknowledged that, in making its final decision as to the matters referred to in cl 3.14.6(q) of the Rules, there is an implied condition that such a decision has to be made within the bounds of reasonableness (referring by analogy to Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30). This acknowledgement was made notwithstanding the AEMC’s contention that the Guidelines are not subordinate legislation.

11. [67]

    I also understood the AEMC to accept that, having regard to the terms of cl 3.14.6(s) of the Rules, it was obliged in making a final decision to both take into account submissions it received on the DOCM (and, implicitly, also the outcome of its consultation with the claimant as required by cl 3.14.6(r)), as well as apply the Guidelines (unless it was satisfied that there were compelling reasons not to do so).

12. [68]

    In my view, the mandatory obligation on the AEMC to apply the Guidelines (unless the exception was engaged which is not the case here), necessarily required the Guidelines to be applied by the AEMC based on their proper construction. As noted above, this task involves taking into account considerations of text, context and purpose, matters which I will develop further below.

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

1. [69]

   As previously noted, Delta claims that by asking and answering the second question described above at [49(c)], the AEMC failed to apply the Guidelines as required by cl 3.14.6(s)(2) of the Rules and that this constitutes jurisdictional error or error on the face of the record.

2. [70]

   As also previously noted, the AEMC addressed the second question as part of its analysis of Delta’s eligibility to claim opportunity costs compensation, as opposed to assessing the value of Delta’s opportunity costs. Delta’s position is that foreclosure of a more profitable opportunity to use scarce capacity or resources is not a precondition to eligibility. Moreover, it claims that, properly construed, [5.3.2] and [5.3.3] of the Guidelines merely require a claimant for compensation to demonstrate scarce capacity or resources due to a technical or commercial limitation and that the foreclosure of an alternative opportunity is necessarily implicit in a finding favourable to a claimant on this matter.

3. [71]

   The alleged jurisdictional error or error on the face of the record is reflected in the following extract from Delta’s outline of submissions dated 21 July 2025 (footnotes omitted):

4. [72]

   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.

5. [73]

   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.

6. [74]

   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.

7. [75]

   A broader but still consistent definition is then set out in [5.3.1] of the Guidelines (which is reproduced at [40] above).

8. [76]

   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.

9. [77]

   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.

10. [78]

    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.

11. [79]

    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.

12. [80]

    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.

13. [81]

    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):

14. [82]

    Similarly, although again in a different statutory context, Gageler CJ, Gleeson and Jagot JJ recently stated in Laming v Electoral Commissioner of Australian Electoral Commission [2025] HCA 31; 99 ALJR 1260 at [43] that: “The assumption that the provisions seek to achieve their expressly stated objects at any price is particularly inapt for these provisions” (emphasis added).

15. [83]

    I consider that these observations (and those of Gleeson CJ in Carr) apply to the proper construction of both the Rules and the Guidelines.

16. [84]

    As to context, as Kirk JA noted in Granville Hotel at [27] with reference to the Ministerial Guideline there (which observations also apply to the Guidelines here):

17. [85]

    As aspects of context, it should be noted that the Guidelines here were drafted by the AEMC, not parliamentary counsel. They also have a very different structure and form to primary or secondary legislation. The Guidelines are drafted in a narrative form which is far more akin to a policy statement or circular than to primary or secondary legislation. This has implications for how the Guidelines are to be construed. As Kirk JA said in Heise v Employer Mutual Limited [2022] NSWCA 283 at [57] (Mitchelmore JA and Griffiths AJA agreeing) with respect to Guidelines published under s 376 of the Workplace Injury Management Act 1998 (NSW) concerning the assessment of an injured worker’s permanent impairment (emphasis added):

18. [86]

    I would also add that it is difficult to see how many canons of construction which apply to the interpretation of primary or secondary legislation could be applied to the Guidelines here.

19. [87]

    For all these reasons, I do not accept that, in identifying the two questions concerning eligibility as set out at [49(b) and (c)] above, the AEMC misunderstood its task or asked itself the wrong question, nor did it misconstrue the Guidelines as claimed by Delta. I reject Ground A1.

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

1. [88]

   As noted above, Ground 1 has the following three elements:

2. [89]

   I will address these three parts of Ground 1 in turn.

3. [90]

   Delta contended that this limb of Ground 1 is concerned with the AEMC’s reasons for denying that there was a technical limitation and, in particular, its finding that Delta provided only limited evidence of attempts to restore the coal stockpile following the APP.

4. [91]

   Delta pointed to the fact that in [2.2.2] of the Final Report the AEMC accepted Delta’s claim that “it reduced its average generation during the APP and July 2022 due to its perceived coal limitation”. It contended that the AEMC also acknowledged “but did not resolve” Delta’s submission that it “brought forward coal deliveries due in July and August 2022 to June 2022, to ensure there was sufficient coal available during the APP to meet AEMO’s request for more energy production from Vales Point”, which “resulted in a technical limitation in July 2022” and that the impact of this limitation was the foreclosure of the opportunity to generate more profitably in July 2022. Despite acknowledging Delta’s argument, the AEMC concluded at [2.2.2] that Delta had provided only limited evidence of attempts to restock the stockpile following the APP.

5. [92]

   In [48] of its outline of written submissions in this proceeding, Delta challenged the first two of the four reasons given by the AEMC at [2.2.2] of the Final Report (see at [52] above) in finding that Delta did not demonstrate a technical limitation, namely:

6. [93]

   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.

7. [94]

   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.

8. [95]

   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).

9. [96]

   For the following reasons, I do not accept Delta’s contentions concerning Ground 1(a).

10. [97]

    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:

11. [98]

    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.

12. [99]

    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.

13. [100]

    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.

14. [101]

    Delta properly acknowledged that an administrative decision-maker is generally not required to disclose all of its thinking processes and provide a running commentary on what it thinks of a claimant’s application so that there is a forewarning of all possible reasons for failure. It also properly acknowledged that a decision-maker may, however, be obliged to disclose the critical issues on which its decision is likely to turn and any adverse conclusion drawn which is not obviously open on the known material (citing Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 at 591–2; [1994] FCA 1074).

15. [102]

    Delta also relied upon the evidence of Mr Joel Aulbury, Compliance and Regulation Manager at Delta, regarding meetings which he attended with representatives of the AEMC, with particular reference to whether he was put on notice that the AEMC was interested in what Delta had done with its stockpile after the APP had ended. Reference was made to Mr Aulbury’s evidence concerning a meeting on 10 May 2023, which was attended by representatives of both Delta and the AEMC, where he said that the focus was on Delta’s actions concerning its stockpile prior to the APP and why Delta did not buy more coal at that time as opposed to a later point in time.

16. [103]

    Delta also placed particular emphasis on the contents of the draft decision which was provided to it under cover of a letter dated 13 December 2023 and invited it to provide any feedback. Reference was made to the following passage at page 11 of the draft decision (footnotes omitted):

17. [104]

    Delta submitted that this material indicated that the AEMC was not concerned with Delta’s actions regarding restoring the stockpile after the APP, which it contrasted with the finding in the Final Report that Delta had made “limited attempts to restore its coal stockpile during and following the APP”. There was a further statement that Delta had provided “limited evidence of attempts to restore the stockpile following the APP”. Delta contends that this constituted a change of position on the part of the AEMC, which was not notified to it.

18. [105]

    For the following reasons, I reject Delta’s claim that it was denied procedural fairness.

19. [106]

    First, I consider that the relevance of Delta’s ability to restore the stockpile was evident from a normal reading of the Guidelines. The following aspects of [5.3.3] of the Guidelines are pertinent (the terms of this provision are set out at [43] above):

20. [107]

    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.

21. [108]

    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.

22. [109]

    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:

23. [110]

    It is necessary to say something more regarding the evidence given by Mr Aulbury on behalf of Delta and Mr Butterworth on behalf of the AEMC regarding the complaint of procedural unfairness.

24. [111]

    Mr Aulbury was not an impressive witness. His honesty is not doubted, but I found many of his answers to be driven by a desire to advance Delta’s self-interest and, at times, his answers were also inconsistent. One example is reflected in the following extracts from his cross-examination regarding his understanding as to whether, at a meeting held on 6 February 2023 which he attended, the AEMC staff were interested in Delta providing further information about its ability to procure coal in July 2022 and not merely during the First and Second Periods. The cross-examination related to a statement in Mr Aulbury’s affidavit (at [23(e)]) where he said that he recalled that representatives of the AEMC asked him a question at that meeting to the effect: “what were Delta’s coal procurement challenges in July 2022 that led to a decline in its coal stockpile in six months prior to June 2022?” (emphasis added):

25. [112]

    The inconsistency in Mr Aulbury’s answers to these questions appeared to relate to his concern to avoid saying anything which he feared might contradict Delta’s procedural unfairness case. I accept the AEMC’s submission that it is “plain to demonstration” what the phrase “in July 2022” means.

26. [113]

    I was also troubled by Mr Aulbury’s responses to questions aimed at having him identify the relevant “claim period”. As noted above, Delta’s claim for compensation was not confined to the First and Second Periods alone, but extended to a further 28 days after the Second Period ended (see at [18] above). At all relevant times, Mr Aulbury held the position of Compliance and Regulation Manager at Delta and he had a prominent role in Delta’s interaction with the AEMC regarding its claim for compensation. One would reasonably expect that he knew that the claim period extended into July 2022.

27. [114]

    Mr Aulbury’s evidence vacillated on the core issue of whether or not Delta was on notice of the AEMC’s interest in its attempts to restore its coal stockpile following the APP and into July. When he was directly asked in cross-examination whether, having received the AEMC’s draft decision in mid-December 2023, he understood that “Delta’s ability to restore its stockpile during and following the APP would be critically relevant to the AEMC’s decision”, Mr Aulbury said: “I understood at that point, yes”. The following exchange then occurred:

28. [115]

    I do not accept that Mr Aulbury was unaware that the AEMC’s interest on this subject extended into July.

29. [116]

    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.

30. [117]

    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”.

31. [118]

    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.

32. [119]

    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”.

33. [120]

    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.

34. [121]

    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.

35. [122]

    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.

36. [123]

    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.

37. [124]

    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).

38. [125]

    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).

39. [126]

    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]).

40. [127]

    I accept the AEMC’s submissions as to why Delta’s complaints regarding Ground 1(c) should be rejected.

41. [128]

    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.

42. [129]

    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.

43. [130]

    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.

44. [131]

    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.

45. [132]

    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.

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

1. [133]

   Delta complains that the AEMC gave only scant reasons for finding that it was not satisfied that Delta demonstrated a commercial limitation. Those reasons address two matters:

2. [134]

   In the course of oral address, senior counsel for Delta stated that although reference was made to the target being based on Delta’s covenants with its financier, the claimed commercial limitation which was ultimately pressed related to the penalty it paid in terms of buying electricity on the spot market at higher prices and that Delta abandoned its reliance upon the covenants. It is unclear whether there was any such abandonment and whether Delta ultimately pressed three limbs of the commercial limitation case. I will assume that it did.

3. [135]

   Delta also pointed to Figure 4 in Attachment 3 to an email sent by Delta to the AEMC on 6 December 2022, which demonstrated that it had been operating far below the minimum operating target after August 2021 up until August 2022 and also forecast that the minimum target would not be achieved until March or April 2023.

4. [136]

   Delta also complained that Figure 4.1 in the draft decision, which purported to show thermal coal spot prices in Australia in the calendar year 2022, was incorrect. Although senior counsel ultimately accepted that the AEMC's staff acknowledged the errors in Figure 4.1, she contended that the error was nevertheless significant because this was the only reason provided by the AEMC for rejecting the spot market penalty point raised by Delta. Delta complains that the issue whether it had exhausted all potential avenues to relieve its coal constraint had nothing to do with its spot market purchases and whether that amounted to a penalty. Further, it complains that the AEMC gave no reason why it rejected Delta's spot market evidence and claim.

5. [137]

   I shall now explain why I reject Delta’s challenges under Ground 2 to both these findings.

6. [138]

   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).

7. [139]

   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.

8. [140]

   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”.

9. [141]

   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”.

10. [142]

    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 Minister 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]:

11. [143]

    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.

12. [144]

    This new contention is rejected for the following reasons.

13. [145]

    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.

14. [146]

    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.

15. [147]

    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.

16. [148]

    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.

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

1. [149]

   Ground 3, which is expressed as being in the alternative to Ground A1, alleges jurisdictional error or error of law on the face of the record in relation to the AEMC’s conclusion that Delta had not shown foreclosure of an alternative profitable opportunity due to the APC.

2. [150]

   The AEMC gave the following two broad reasons for this conclusion:

3. [151]

   It is desirable to elaborate upon the AEMC’s reasons in relation to these matters before addressing Delta’s judicial review claims.

4. [152]

   In [2.2.4] of the Final Report, the AEMC noted that Delta had initially argued in December 2022 that it would have preferred to generate at a lower level during the APP to conserve its scarce coal so that it could generate and receive higher uncapped prices later.

5. [153]

   The AEMC contrasted this claim with Delta’s subsequent response to the DOCM where it said that Delta argued that:

6. [154]

   The AEMC found that Delta’s response to the draft decision adopted another, different position. It described Delta’s submission as claiming that, under normal circumstances, a spot price of $300/MWh would be sufficient for Delta to bid its generation at normal level but that, due to the price capping during the APP, when Delta said it was coal-constrained, it elected to lower its generation levels. Having regard to what the AEMC said were inconsistent submissions, the AEMC concluded that “it is not clear that Delta’s generation behaviour would have been different had the price cap not been applied”, with the consequence that it was unable to find on the basis of the available evidence “that the price cap caused the foreclosure of an alternative, more profitable, opportunity during or after the APP for Delta”.

7. [155]

   Delta submits that the AEMC’s finding of inconsistency stems from a misunderstanding by the AEMC and a failure to consider Delta’s submissions responding to the DOCM. Delta provided two responses to the DOCM. The first was the draft submissions dated 17 October 2023. It emphasised that it was made clear there that those submissions were to be read in conjunction with Delta’s earlier material dated 6 December 2022. At page 12 of its 17 October 2023 submission, Delta summarised its position as follows (emphasis in original):

8. [156]

   Delta’s second response to the DOCM is a letter dated 19 October 2023, which was a shortened version of the draft response. Again, Delta asked the AEMC to read this submission in conjunction with the 6 December 2022 material. It further submitted that the Vales Point coal stockpile was at critically low levels and generation was scaled back in June 2022 to manage both the scarcity of coal and “material risk of exposure to financial penalties from an inability to cover contract position after the APC was lifted”.

9. [157]

   Delta now complains that the AEMC’s finding as to inconsistency appears to rely upon the first sentence of the following paragraph in the 19 October 2023 submission and fails to take into the remainder of the paragraph:

10. [158]

    Thus, Delta submits that it made clear in these submissions that it reduced its generation during the APP not just because of scarce coal but also because it expected prices to increase after the APP when capped prices would no longer apply.

11. [159]

    Delta also complains that the AEMC was itself inconsistent on this point. It draws attention to the fact that in [10] of the executive summary to the Final Report the AEMC accepted Delta’s argument that “it may have reduced its average daily generation during and following the APP because of its concerns about coal levels”. It says that this was inconsistent with the AEMC’s subsequent reference in that paragraph to Delta having provided “inconsistent explanations of the reasons for which it chose to lower its generation during and following the APP”.

12. [160]

    It is desirable to set out the relevant parts of [10] of the executive summary to the Final Report which explains the AEMC’s approach to the second question (namely whether Delta had suffered the foreclosure of an alternative opportunity to use scarce capacity or resources more profitably either at the same time or at a later point in time arising from the APP):

13. [161]

    Delta then points to its response to the draft decision which it claims was substantially the same as those it provided in December 2022 and October 2023. It relies in particular on the following extracts from its response to the draft decision:

14. [162]

    Relying on those extracts, as well as other parts of that response, Delta submits that it was made clear to the AEMC that Delta reduced its generation during the APP not merely because of the scarce coal, but also because of the imposition of the APC.

15. [163]

    Having regard to all this material Delta provided to the AEMC, Delta complains that the AEMC failed to appreciate the material in [2.2.4] of the Final Report. Even if the AEMC’s relevant findings were findings of fact, Delta submits that this was not fatal to Ground 3 because such factual findings “were made as a consequence of a failure to consider Delta’s submissions or a misunderstanding of those submissions…”.

16. [164]

    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.

17. [165]

    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.

18. [166]

    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.

19. [167]

    The second reason why the AEMC found in the Final Report that Delta had not foregone value from an alternative opportunity arising from the APC related to the AEMC’s analysis that, while there were periods that Delta and its contracted coal suppliers experienced challenges in delivering coal to Vales Point, these challenges did not prevent Delta from increasing its coal stockpile during and following the APP. The AEMC then added that, while Delta may have had scarce coal supplied during the APC, and even if this constituted a relevant limitation, the APC did not impact its ability to generate more energy following the APP, that being the period in which Delta claimed its forgone opportunity.

20. [168]

    Delta describes this reasoning as irrational because “there’s no logical connection between the evidence before the commission and that finding, that the finding overlooks the fact that Delta used coal during the APP which it could have used after that period when prices were expected to be higher”. Delta submits that the AEMC simply overlooked Delta’s submissions on this issue. It also points to the fact that the AEMC’s staff had noted in an internal document dated 22 February 2024 that “it could be argued that Delta expected still higher prices once the APC was lifted”.

21. [169]

    It is desirable to set out the entirety of that internal AEMC document:

22. [170]

    Delta contends that the AEMC’s finding that an increase in Delta’s stockpile during and after the APP meant it did not forgo a valuable opportunity is both irrational or illogical and a misunderstanding of “opportunity costs” in the Rules and the Guidelines.

23. [171]

    This contention is rejected. First, the fact that Delta’s stockpile grew supplied an intelligible justification for the AEMC’s finding that its ability to generate more energy after the APP was unaffected by the APC event (which if so meant there was no foregone opportunity). This path of reasoning was not irrational or illogical in circumstances where the AEMC had found that there was only limited evidence of Delta’s attempts to restore the stockpile during and following the APC.

24. [172]

    Secondly, there was no misunderstanding by the AEMC of the definition of opportunity costs. At [2.2.4] of the Final Report, the AEMC correctly recorded the definition of opportunity costs in both [5.3.1] of the Guidelines and cl 3.14.6(a) of the Rules. It is also clear from the fact that the AEMC turned its mind to whether the APC event affected Delta’s ability to generate more energy following the APC event. That was the very period in which Delta asserted it forfeited its opportunity to use scarce resources.

25. [173]

    Thirdly, as senior counsel for the AEMC correctly pointed out, it is described at [2.2.4] of the Final Report as a “further” point. Thus, even if there was an error in part of AEMC’s analysis, it would not be material. The AEMC’s primary conclusion, based on “inconsistent” Delta submissions, was sufficient to reject the suggestion that the APC foreclosed a more profitable opportunity.

(f) Recovery of costs incurred by the AEMC

1. [174]

   After publishing its Final Report, the AEMC recovered $104,796.62 in costs from Delta pursuant to cl 3.14.6(v) of the Rules. This reflected part of the AEMC’s costs of retaining external consultants in assessing Delta’s claim. Delta contends that this sum should be repaid if the AEMC made reviewable errors, because this would mean the AEMC had not carried out its functions under cl 3.14.6 in respect of Delta’s claim.

2. [175]

   Strictly speaking, this issue does not arise because no reviewable error has been established. In any event, in circumstances where it is made clear in cl 3.14.6(v) of the Rules that the AEMC can recover its costs “prior to the claim being considered or determined” it is difficult to see why the AEMC would not be entitled to recover at least some of its costs leading up to the point of its final decision even if that final decision was found to be vitiated by jurisdictional error.

3. [176]

   In its reply submissions filed on 20 August 2025, Delta raised (for the first time) a claim that the AEMC had failed to comply with the Hardiman principle. The issue was then addressed by the parties in both supplementary written submissions and in oral address. For the following reasons, I am not persuaded that the principle has been breached in the particular circumstances here.

4. [177]

   The principle can be traced back at least to R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13; [1980] HCA 13, where the respondent Tribunal adopted what the High Court described as “an unusual course of contesting the prosecutors’ case for relief … by presenting a substantive argument”. In particular, after senior counsel for the Tribunal had conducted a searching examination of one of the prosecutor’s witnesses, the High Court said at 35–6:

5. [178]

   It is notable that those statements of principle were made in the context of judicial review of the Tribunal’s conduct of an adjudicative process involving contradicting parties presenting submissions to the Tribunal. The basis for the principle relates to concerns regarding impartiality, particularly where there is a prospect of remitter if a judicial review challenge is successful. A body such as the Tribunal generally needs to play an appropriate role as a disinterested adjudicator.

6. [179]

   The Hardiman principle is not, however, unqualified. I respectfully agree with the following observations by Colvin J in MetLife Insurance Ltd v Australian Financial Complaints Authority (No 3) [2022] FCA 849; 411 ALR 163 at [12]:

7. [180]

   The reference to Fagan v Crimes Compensation Tribunal (1982) 150 CLR 666; [1982] HCA 49 is significant, as that case well illustrates the flexible character of the principle. In that case, Brennan J said at 681–2 (citations omitted):

8. [181]

   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).

9. [182]

   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.

10. [183]

    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.

11. [184]

    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]).

12. [185]

    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).

13. [186]

    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.

14. [187]

    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.

15. [188]

    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.

16. [189]

    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.

17. [190]

    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.

18. [191]

    I consider that the following additional matters indicate that the AEMC performed a measured and appropriate role as contradictor:

Conclusion

1. [192]

   For all these reasons, the amended summons will be dismissed, with costs.