REGULATION, LIABILITY AND SMALL CUSTOMER RIGHTS IN THE ENERGY SUPPLY INDUSTRY by REUBEN HERBERT STILLMAN This Thesis submitted for the Degree of Master of Laws (Hons) School of Law, University of Western Sydney 2007 STATEMENT OF THE ORIGIN OF SOURCE MATERIAL The work presented in this Thesis is to the best of my knowledge and belief, original, except as acknowledged in the text. I hereby declare that I have not submitted this material, either in full or in part for a degree in this or any other Institution --------------------------------- R.H.Stillman i CONTENTS DECLARATION ACKNOWLEDGMENT TABLE OF CONTENTS i LIST OF FIGURES iv LIST OF TABLES v TABLE OF CASES vi TABLE OF STATUTES & xiii REGULATIONS ABSTRACT Chapter 1: INTRODUCTION 1.1 Public Utility Services and Regulation 3 1.2 Structure of the Thesis 7 Chapter 2: REGULATION AND THE NATIONAL ELECTRICITY MARKET 2.1 Introduction 11 2.2 Power System Model 13 2.3 The National Market Participants 15 2.4 The National Regulatory Structure 2.4.1 Introduction 17 2.4.2 The Powers of the Australian Energy Regulator (AER) 20 2.4.3 The National Electricity Rules and Compliance Requirements 24 2.5 National Law Immunities for Electricity Suppliers 2.5.1 The Immunity Provisions 27 2.5.2 Limits of Immunity Clauses 34 2.5.3 The “Bad Faith or Through Negligence” Limitation 37 2.6 Regulation In State Jurisdictions : New South Wales Model 42 2.7 General Conclusions 44 Chapter 3: THE TRADE PRACTICES ACT 1974 AND ELECTRICITY CONTRACTS 3.1 Introduction 47 3.2 The Trade Practices Act 1974: Key Concepts – Goods and Supply Time 47 3.3 TPA Part V : Division 2 - Conditions and Warranties 52 3.3.1 Electricity Supply Association of Australia (ESAA) v Australian 52 Competition and Consumer Commission Case 3.3.2 Exploring Standards and Circumstances a Case Study 58 3.4 Trade Practices Act 1974: Section 74: Supply of Services 62 3.4.1 A Direct Relationship 62 3.4.2 Indirect Third Party Relationship 65 3.4.3 Summary 66 3.5 Quality and Fitness and the Sale of Goods Act 1923 (NSW) 67 3.6 Summary 69 Chapter4: CUSTOMER CONNECTION AND SUPPLY CONTRACTS 4.1 Introduction 71 4.2 Full Retail Competition and Standard Form Supply Contracts 73 4.3 Limiting Terms and Exclusion Clauses in the Standard Form Connection 77 Contract 4.3.1 Commentary on Exclusion Clauses 77 4.3.2 Discussion: Are Exclusion Clauses Effective to Limit the Liability of 83 the Network Service Provider? Reuben Stillman LLM (Hons) Thesis ii 4.4 The Application of an Exclusion Clause in the Connection Contract 87 4.5 Discussion and Conclusions 94 Chapter 5: SERVICE PROVIDER’S LIABILITY FOR NEGLIGENCE 5.1 Introduction 95 5.2 The Duty Issue 97 5.3 Standard of Care . 100 5.4 The Civil Liability Act 2002(NSW): Division 2 5.4.1 General Principles 104 5.4.2 Other Principles 110 5.5 The Civil Liability Act 2002(NSW): Assumpsion of Risk and the Obvious 112 Risk 5.5.1 General 113 5.5.2 Obvious Risk 114 5.6 Non-Delegable Duty and Acts of Independent Contractors 120 5.7 Risk and the Marginal Utility of Safety 5.7.1 Introduction 127 5.7.2 The Application of the Safety Principle 128 5.7.3 Criticism 133 5.8 Causation 5.8.1 Civil Liability Act 2002(NSW): General Principles 134 5.8.2 Probability and Assumptions of Risk 137 5.9 Contributory Negligence 5.9.1 Principles 141 5.9.2 Case Studies 143 5.10 Case Study of an Undetected Network Failure 147 5.11 Summary and Conclusions 151 Chapter 6: LIABILITY FOR NEGLIGENCE: PURE ECONOMIC LOSS 6.1 Introduction 155 6.2 Categories of Economic Loss 158 6.3 Duty of Care to Avoid Economic Loss 159 6.4 Economic Loss : Utility Cases 162 6.5 Economic Loss - Indeterminacy 168 6.6 Discussion and Conclusions 185 Chapter 7: THE ROLE OF THE ENERGY WATER AND GAS OMBUDSMAN IN DISPUTE RESOLUTION WITH NETWORK SERVICE PROVIDERS 7.1 Introduction 190 7.2 Articles of Association 190 7.3 Statutory Powers 191 7.4 Functions of the Ombudsman 194 7.5 Jurisdiction of the Ombudsman 195 7.6 Procedures of the Ombudsman 195 7.7 Powers of the Ombudsman 196 7.8 CitiPower v Electricity Industry Ombudsman (Vic) Ltd and the 198 Ombudsman’s Power of Decision 7.6.1 Facts and Determination 198 7.6.2 Argument by the Plaintiff – Citpower 200 7.6.3 Argument on behalf of the Defendant – Victorian Electricity Industry 200 Ombudsman 7.6.4 Decision 201 Reuben Stillman LLM (Hons) Thesis iii 7.9 Case Study 205 7.10 Discussion and Conclusions 207 Chapter 8: CONCLUSIONS 209 GENERAL REFERENCES 223 Reuben Stillman LLM (Hons) Thesis v LIST OF TABLES Chapter 2: REGULATION AND THE NATIONAL Page ELECTRICITY MARKET Table 2.1 Functional Classification of the Power System 14 Table 2.2 Regulation Legislation and Authorities 19 Table 2.3 Investigative Powers Of the Australian Energy Regulator 23 Table 7.1 Electricity complaints 191 TABLE OF CASES ACCC v Nationwide News Pty 1996 ATPR 41-519 54 Annets v Australian Stations (Tame v NSW) (2002) 211 CLR 317 111,127,175 Anns v Merton LBC [1978] AC 728 171 Aravco Ltd v Qantas Airways Ltd (1996) 185 CLR 43 57 Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283. 50, 79 Astley v Austrust Ltd (1999) 197 CLR 1 89,142 Australian Football League Ltd v Carlton Football Club Ltd [1998] 2 VR 546 201,202. Australian National Airline Commission v Newman (1987) 162 CLR 466 108 Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 85 Barret Burston v Esso Australia Ltd [2003] VSC 211 155,167,181 Birch v Central West County Council (1969) 119 CLR 652 83,109, 137 Blyth v Birmingham Waterworks Co. (1856) 11 Exch 781 100 Board of Fire Commissioners (NSW) v Ardonin (1961) 109 CLR 105 36 Bonnington Castings v Wardlaw [1956] AC 613. 136 Bow Valley Husky (Bermuda) Ltd v Saint John Shipbuilding Ltd 172 (1998) 153 DLR(4th) 385 Bringinshaw v Briginshaw (1938) 60 CLR 336 139 British Celanese Ltd v A.H. Hunt (Capacitors) Ltd (1969) 2 All ER 1252 164 Brodie v Singleton Shire Council (2001) 206 CLR 512. 108 Brown v Rolls Royce Ltd [1960] 1 WLR 210. 101 Bryan v Maloney (1995) 182 CLR 609 160 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 331 93, 122, 123, 125, 126, 152 Bus v Sydney County Council (1989) 167 CLR 78 114, 115, 146,147 Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 77,84 Butterfield v Forrester (1809) 11 East 60 142 vi Cain v Great Southern Energy (2000) District Court, Albury, Nov 2000. 118 Calf v Sydney County Council [1972] 2 NSWLR 521 99 Caltex Oil v The Dredge “Willemstad” (1976) 136 CLR 529 161,162, 164, 168 169, 171,174, 175,180,185,188,215 Canadian National Railway Co v Norsk Pacific Steamships Co 170,173 (1992) 1 SCR 1021 Caparo v Dickman [1990] 2 AC 605 160,176 Cattle v Stockton Waterworks (1875) LR 10 QB 453 159 Causer v Browne [1952] VLR 1 85 Cerkan v Haines (1990) 21 NSWLR 296 2, 96,127, 210 Chapel v Hart (1998) 195 CLR 256 137 Chapman v Hearse (1961) 106 CLR 112 97 Citipower Pty Ltd v Victorian Industry Ombudsman (Vic) Ltd [1998] VSC 2049 7,91,157,190, 197 198-202, 207,216-218 Clive Boddington v Southern Mitchell County Council 1990 NSWSC, 11th April 1990 108 Comco Constructions Pty Ltd v Westminster Properties Pty Ltd [1990] 1 WAR 335 49 Commissioner for Consumer Affairs v Spadtan Pty Ltd 1995 ATPR 41-416 55 Commissioner of Railways v Ruprecht (1979) 142 CLR 148 146 Commissioner of Railways (WA) v Stewart (1936) 56 CLR 520 59,83 Cain v Great Southern Energy [2000] NSWDC 119 118 Dederer v Roads and Traffic Authority 2005 Aust. Torts Reports 116 Dillon v Baltic Shipping Co. (1989) 92 ALR 331 57 Director of Public Prosecutions v Esso Australia Pty Ltd vii [2001] VSC 263 157, 181 Donoghue v Stevenson [1932] AC 562 97,99,111 Dorset Yacht Co v Home Office [1970] AC 1004 160 Doubleday v Kelly [2005] NSWCA 15 118,146 Douglas & Ors v Brogan Shire Council & Water Resources Ministerial Corporation [1994] 55053 Supreme Court of NSW. 38, 46, E v Red Cross Society (1991) 27 FCR 310 64 Eastman v Hon.Jeffery Miles & Ors 2004 ACTSC 25/5/2004 38 Electricity Supply Association of Australia v ACCC [2001] FCA 1296 2,6,8,47, 52,55,157 Elliott Steam Tug Co v The Shipping Controller (1922) 1 KB 127 159 Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 137 Fraser v Lismore City Council (1956) 1 LGRA 34 104,131,143 Ghantous v Hawkesbury City Council (2001) 206 CLR 512 115 Grant v Australian Knitting Mills Ltd [1936] AC 85 49,98 Grimshaw v Ford Motor Co (1981) App.174 Cal.Rpt.,348. 130,131 Hackshaw v Shaw (1984) 155 CLR 614 119 Hadley v Baxendale (1854) 156 ER 145 93,158 Haley v London Electricity Board [1965] AC 778 99,115 Harrison v Sydney Municipal Council (1931) 10 LGR 116 83 Hedley Byrne v Heller & Partners [1964] AC 465 163,164,206 Harper v Southern Riverina County Council 1988 District Court, Wagga NSW, (unreported). 124,126,136 Hollis v Vabu Pty Ltd (2001) 207 CLR 21 121, 152 viii Hughes v Australian Telecom 1997 ATR 82-428 101 Hunter Douglas Australia Pty Ltd v Perma Blinds(1969) 122 CLR 65 77 Jaensch v Coffey (1984) 155 CLR 180 99 Johnson Tiles & Others v Esso Australia Pty Ltd [2003] VSC 27 2, 157,162 167,180, 186, 188,215,216, 218, 221 Kelly v Bega County Council [1982] NSWCA 145 Kendall (Henry) & Sons v Lillico [1969] 2 AC 31 68 Kentucky Utilities Co.