IN FAVOUR OF
Hunter Valley Coal Network Access Undertaking
Dated: 23 December 2015
BY
AUSTRALIAN RAIL TRACK CORPORATION LIMITED (ABN 75 081 455 754) of
Ground Floor, ARTC Building, Off Sir Donald Bradman Drive, Passenger Terminal Road, Mile End South Australia 5031 (“ARTC”)
IN FAVOUR OF
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION being a body corporate established under section 6A of the Competition and Consumer Act 2010 (“ACCC”)
document35
Contents
2.2A | Privatisation of ARTC | 8 | |
4.5 Depreciationt-1 is Depreciation applicable to the RAB Floor Limit in
the calendar year (t-1).Economic cost 40
4.7 Depreciation of Segment Specific Assets 41
4.9 Unders and overs accounting 45
4.10 Annual ACCC compliance assessment 46
4.12 Structure of Charges - Coal Access Rights 50
4.13 Structure of Charges - Non-Coal Access Rights 51
4.15 Standard Access Charge 53
4.16 Charge differentiation 54
4.17 Limits on Charge differentiation 56
4.18 Process for finalising Standard Access Charges 57
4.19 Provision of forecast information, pricing and coal volumes 58
4.20 Facilitating assignments of Relinquished Capacity 59
5.3 Identification of Shortfall in existing Capacity 63
5.4 Event leading to Capacity Shortfall of less than five days 64
5.5 Event leading to Capacity Shortfall greater than five days 64
5.6 Shortfall in creation of Additional Capacity 65
5.7 Capacity resumption, relinquishment and transfer 65
7 CAPACITY INVESTMENT FRAMEWORK OVERVIEW 67
7.3 Step 1 - Project initiation 67
7.4 Step 2 - Industry consultation for a project 68
7.5 Step 3 - User funding option 68
8.1 Hunter Valley corridor capacity strategy 69
8.2 Projects endorsed by the RCG for concept assessment 70
8.3 Additional Capacity recommended by the HVCCC 70
8.4 Additional Capacity requested by the Applicant 70
8.5 Projects identified by ARTC 71
9.3 Operational Efficiency Incentive Scheme 75
9.9 Endorsement of project development stages for Additional Capacity 85
10.2 Capital Contribution Principles 86
10.3 Construction and ownership of assets 89
11.1 ARTC consent to a project 89
11.2 ARTC decision to fund a project 89
12 NETWORK TRANSIT MANAGEMENT 90
12.1 Medium Term Capacity Management 90
12.2 Short Term Capacity Management 90
12.3 Network Transit Management 90
13 PERFORMANCE MEASUREMENTS 90
13.1 Network Key Result Areas 90
13.2 Negotiation of key performance indicators for each Access
14 INNOVATION INCENTIVE MECHANISM 91
14.1 Objective of mechanism 91
14.2 Operation of mechanism 92
14.4 Innovation pricing principles 93
15.1 Final 2011 HVAU compliance assessment 95
16.2 Interpretation 109
SCHEDULES 112
SCHEDULE A:1 - Elements of Coal Access Agreements 113
SCHEDULE A:2 - Elements of Non Coal Access Agreements 118
SCHEDULE B - Network 121
SCHEDULE C - Network Management Principles 123
SCHEDULE D - Performance Measurements 128
SCHEDULE E - Segments 131
SCHEDULE F – Forecast Standard Access Charge 132
SCHEDULE G - Principles to guide ARTC/ HVCCC Consultation 134
SCHEDULE H - Annual Compliance Assessment - information provision
and timing 136
SCHEDULE I - Parent Guarantee 140
Annexure A - Indicative Access Holder Agreement 151
1 Preamble
1.1 Introduction
Australian Rail Track Corporation Limited (“ARTC”) gives this undertaking to the Australian Competition and Consumer Commission (“ACCC”) pursuant to Part IIIA of the Competition and Consumer Act 2010 (Cth) (“CCA”). This undertaking reflects the following characteristics of ARTC’s commercial environment specific to the Hunter Valley Rail Network:
(a) ARTC was established on 24 February 1998 as a company under the Corporations Act 2001 (Cth). ARTC’s shares are fully owned by the Australian Government.
(b) On 5 September 2004, ARTC commenced a 60 year lease of certain parts of the rail network in NSW including the Hunter Valley network forming the Network. ARTC is responsible for managing the Network and for the granting of access to the Network.
(c) ARTC is a vertically separated provider of access.
(d) The predominant usage of the Network is for rail services to the Hunter Valley coal markets, subject to legislative requirements in relation to other traffic, and in particular ARTC’s obligations to provide and maintain priority for passenger services under the Transport Administration Act 1988 (NSW). ARTC recognises that the operation, maintenance and investment in the development of, the Network is primarily to improve utilisation and performance of such rail services and to optimise coal export throughput in the Hunter Valley. ARTC also recognises that non-coal users of the Network require certainty of access and that the views of non-coal users are to be considered and taken into account in making future decisions to invest in new Capacity on the Network.
(g) ARTC recognises that the Network is also used by non-coal users. In relation to traffic utilising the Network other than for the purpose of hauling coal, ARTC operates in a competitive environment where competition from other modes of transport (particularly road) places constraint on rail transport and Access pricing. Access pricing for this
traffic is such that it only meets their Direct Cost of Access to the Constrained Network.
(h) ARTC acknowledges that there is a Hunter Valley coal industry objective to ensure that Coal Chain Capacity is maintained, developed and utilised efficiently. ARTC will, subject to confidentiality obligations, work cooperatively with coal producers, the HVCCC and other parties as required to achieve this objective.
(i) ARTC has adopted the concepts of equity and transparency as key elements of its pricing policies. ARTC will not discriminate price on the basis of the identity of the Applicant. By so doing, ARTC seeks to encourage customer confidence, competition and market growth in the rail and Hunter Valley export coal industries in an evolving environment.
(j) As an access provider, maintenance of, and investment in, the Network and Associated Facilities is a large component of ARTC’s current cost structure. These services are either outsourced, and managed under contracts entered into on commercial terms as a result of a competitive tender process, or, in ARTC’s view, otherwise managed on an efficient basis. ARTC has adopted this practice with a view to ensuring that the management, operation and maintenance of the Network and Associated Facilities by ARTC and ARTC’s cost structure is Efficient.
(k) ARTC has prepared this Undertaking voluntarily in pursuance of its charter objectives.
(l) This Undertaking will be applied consistently to applications for Access Rights where such applications are within the scope of this Undertaking.
1.2 Objectives
This Undertaking is a voluntary undertaking submitted by ARTC under Part IIIA of the CCA. The intent of the Undertaking is to:
(a) provide a framework to manage negotiations with Applicants for Access Rights to the Network;
(b) establish a workable, open, non-discriminatory, efficient and inclusive process for lodging and processing applications for Access Rights;
(c) use transparent and detailed methodologies, principles and processes for determining Access revenue limits, terms and conditions;
(d) reach an appropriate balance between:
(i) the legitimate business interests of ARTC, including:
(A) an opportunity to recovery of at least sufficient revenue to meet the efficient costs associated with providing Access to the Network, having regard to the efficient operation of the Hunter Valley Coal Chain;
(B) a fair and reasonable return on ARTC’s investment in the Network and Associated Facilities commensurate with its the commercial and regulatory risks involved; and
(C) encouraging customer confidence and market growth in the rail industry and also, in particular, the Hunter Valley coal industry;
(ii) the interest of the public, including:
(A) increasing competition and ensuring efficient use of resources;
(B) identifying improvements to the Network and Associated Facilities to facilitate optimal performance of the Hunter Valley Coal Chain; and
(C) the promotion of economically efficient investment, use and operation of the Network, being an element of the Hunter Valley Coal Chain; and
(C)(D) facilitating appropriate coordination between ARTC and the HVCCC in order to promote the coordinated and efficient operation of the Hunter Valley Coal Chain.
(iii) the interests of Access Holders using Access Rights, and Applicants seeking Access Rights to the Network, including:
(A) providing Access to the Network on fair and reasonable terms, including providing for the determination of tariffs that reflect the matters in section 1.2(d)(i)(A) and (B);
(B) providing Access in a transparent, efficient and non- discriminatory manner; and
(C) providing reliability in rail infrastructure’s contribution to the Hunter Valley Coal Chain;
(e) provide an efficient and effective dispute resolution process in the event that ARTC and the Applicant are unable to negotiate mutually acceptable Access Agreements; and
(f) operate consistently with the objectives and principles in Part IIIA of the CCA and the Competition Principles Agreement including, without limitation, the pricing principles in section 44ZZCA of the CCA.
1.3 Recognition of Coal Chain Principles
In preparing the Access Undertaking, ARTC has sought to recognise the importance of the following principles to coal producers seeking to export coal to the Port of Newcastle:
(a) coal producers require long term certainty of access to a contracted portion of Coal Chain Capacity, of which one component is contracted Capacity with ARTC;
(b) the availability of a reliable process through which access to Capacity can be negotiated within the broader context of the Hunter Valley Coal Chain;
(c) the development of a set of System Assumptions to apply across the Coal Chain and for ARTC to participate in the development of these System Assumptions in so far as they relate to the Network and to reflect the applicable Relevant System Assumptions in Access Holder Agreements; and
(d) there should be workable alignment between the allocation and utilisation of Capacity and the allocation and utilisation of capacity at the coal terminals at the Port of Newcastle.
1.4 Contract structure
(a) In recognition of interests pertaining to coal traffic, identified in section 1.1(e) and (f), ARTC will, on request, enter into a direct agreement with a Coal Customer for Coal Access Rights to the Network (an Access Holder Agreement) subject to the following terms:
(i) the Coal Customer may only utilise those Access Rights through an Accredited Operator who has been nominated by the Access Holder for that purpose; and
(ii) that Operator must have an Operator Sub-Agreement with ARTC which has been endorsed by the Access Holder.
(b) An Accredited Operator may also enter into an Access Holder Agreement with ARTC under which it will hold Coal Access Rights. The Accredited Operator will also need an Operator Sub-Agreement with ARTC to utilise those Coal Access Rights.
(c) For non-coal traffic, ARTC will enter into a single Access Agreement for Non-Coal Access Rights with an Accredited Operator which will provide for both an entitlement to Train Paths and a right to operate Non-Coal Trains on those Train Paths, or with an Applicant who is not an Accredited Operator where the Applicant will procure the services of an Accredited Operator to operate the Trains on those Train Paths provided that all of the terms and conditions of the Access Agreement are met by the Applicant or the Operator.
2 SCOPE AND ADMINISTRATION OF THE UNDERTAKING
2.1 Scope
(a) This Undertaking provides for the negotiation and use of Access Rights to the Network, with details of the specified services and sections of the Network defined during Access negotiations. Access will include, in addition to the track, the benefit of Associated Facilities required to facilitate such Access.
(b) The Network means the network of railway lines delineated or defined in Schedule B, excluding Annexure 1 to Schedule B, where Annexure 1 to Schedule B contains a map, being a representation of these railway lines for illustrative purposes only.
(c) This Undertaking does not extend to any Extension to the Network nor to the track and infrastructure not part of the Network that may connect to the Network.
2.2 Grant and Duration of Undertaking
(a) Subject to section 2.2(c)2.2(d):
(i) this Undertaking takes effect on and from the later of 1 July 2016 and twenty one (21) days after the ACCC has published its decision to accept the Undertaking under section 44ZZA(3) of the CCA (“Effective Date”);
(ii) on and from the Effective Date, all provisions of the Undertaking are taken to have commenced operation on 1 July 2016 (“Commencement Date”).
(ii)
(b) The Undertaking will continue until the earlier to occur of:
(i) 31 December 2026 2038 (Initial Term) as may be extended for Further Terms in accordance with section 2.3 2.3(g) (End Date); or
(ii) the withdrawal of this Undertaking in accordance with the CCA; or
(ii)(iii) the replacement of this Undertaking or adoption of a new Undertaking by a New Lessee or a New Owner in accordance with section 2.2A, section 2.2(c),
being, the Term of the Undertaking.
(c) If during the Term the lease for the Network is transferred or granted to an entity other than ARTC:
(i) ARTC may by written notice to the ACCC withdraw this Undertaking; and
(ii) if the notice in paragraph (i) is given, ARTC must at the same time as issuing a withdrawal notice use best endeavours to procure that the lessee of the Network give an undertaking to the ACCC on the same terms of this Undertaking.
The ACCC will approve a withdrawal of this Undertaking and submission of a new undertaking which complies with section 2.2(c)(ii) above.
(d)(c) If a person applies to the Australian Competition Tribunal under section 44ZZBF(1) of the CCA within the 21 day period referred to in section 2.1(a) for a review of the ACCC’s decision to accept this Undertaking and the Tribunal affirms the ACCC’s decision, then the Effective Date and the Commencement Date will be the time of the Tribunal’s decision.
(d) ARTC undertakes to the ACCC that it will comply with the terms and conditions specified in this Undertaking including in relation to the grant of Access Rights to the Network from the earlier of the Commencement Date and the Effective Date.
(a) It is an objective of ARTC and the ACCC under this Undertaking to ensure that, in the event of any ARTC Privatisation, this Undertaking (either itself or by virtue of a new or replacement access undertaking in substantially the same form given under Part IIIA of the CCA) will continue to apply in respect of the New Lessee or New Owner, as applicable, and subject to any variations to the terms of this Undertaking which the ACCC determines under this section 2.2A are necessary or appropriate to reflect the ARTC Privatisation (“Privatisation Objective”).
(b) If, during the Term:
(i) the lease for the Network is transferred or granted to an entity (“New Lessee”) other than ARTC; or
(ii) there is a change in the shareholders of ARTC, such that an entity or entities (“New Owner”) other than the Australian Government controls ARTC,
(either event being an ARTC Privatisation)
the ACCC will:
(iii) publish an issues paper (“Issues Paper”) inviting public submissions in relation to the ARTC Privatisation, including:
(A) whether any variations may be required to the terms of this Undertaking, having regard to the ARTC Privatisation and the identity of the New Owner or New Lessee;
(B) whether a new or replacement access undertaking is likely to be required in order to give effect to the Privatisation Objective, in the event that the New Owner or New Lessee is not a party to the Undertaking; and
(C) any other matters that the ACCC considers are relevant in order to give effect to the Privatisation Objective.
(iv) The Issues Paper must specify how submissions may be made and the day by which submissions must be made (which must be at least 14 days after the day the Issues Paper is published).
(v) Without limitation, the Issues Paper may request that submissions address any of the following:
(A) implications of the ARTC Privatisation for the Term;
(B) in the event that the New Lessee or the New Owner (or a related entity of either) holds any vertical or conglomerate interests in relation to the Network, the need for new or modified ring fencing, confidentiality, organisational separation, non-discrimination, reporting or other measures;
(C) the need for, and nature of, variations to the capacity investment framework, including but not limited to, the user-funding provisions in section 10;
(D) the need for, and nature of, a regime for ensuring the efficiency of operational expenditure;
(E) the need for, and nature of, variations to the process for determining the structure of Charges, including the factors applied to the determination of Charges for Non- Coal Access Rights pursuant to section 4.16(c);
(F) accounting and other transparency measures to limit or prevent cost-shifting, cross-subsidisation, related party transactions or other inefficient pricing practices;
(G) whether provision should be made to ensure that all existing Access Holder Agreements remain in force following the ARTC Privatisation;
(H) what variations, if any, are required to ensure that the New Lessee or New Owner continues to participate actively in industry consultation through the HVCCC and the RCG; and
(I) any of the matters listed in section 44ZZA(3) of the CCA or which the ACCC otherwise considers relevant.
(vi) The ACCC must have regard to any submission received under section 2.2A(b)(iii) in determining its ARTC Privatisation Notice.
(vii) The ACCC: must publish an ARTC Privatisation Notice that specifies:
(A) whether the Privatisation Objective can be satisfied by the continued operation of this Undertaking or whether a new or replacement access undertaking will be required to be submitted by the New Lessee or New Owner;
(B) any variations that the ACCC requires to be made by the New Lessee or New Owner to the terms of this Undertaking (either directly or in any new or replacement access undertaking) in order to give effect to the ARTC Privatisation Objective;
(C) the ACCC’s reasons for requiring the variations; and
(D) the date by which the New Lessee or New Owner must submit either:
(I) a new access undertaking to the ACCC under section 44ZZA(1); or
(II) a request to vary this Undertaking under section 44ZZA(7),
in accordance with the ARTC Privatisation Notice.
(viii) ARTC must, and must cause any New Lessee to, comply with this section 2.2A.
(e)
2.3 Mandatory review of Undertaking
(a) Commencing no later than each Review Date, ARTC will review the Undertaking to consider its appropriateness for the remaining Term having regard to the objectives in section 1.2 of the Undertaking and must, as a minimum, review:
(i) the calculation of Depreciation;
(ii) the Rate of Return;
(iii) in relation to Segments identified as forming part of Pricing Zone 3, the ongoing requirement for a separate RAB methodology for Pricing Zone 3; and
(iv) the operation and effectiveness of any efficiency incentive arrangements under the Undertaking.whether to extend the Undertaking for a Further Term.
(b) As part of the review under this section 2.3, ARTC will:
(i) prepare and publish on its website an ‘issues paper’ on the appropriateness of the calculation of Depreciation, Rate of Return, the ongoing requirement for a separate RAB methodology for Pricing Zone 3, ARTC’s preliminary view as to whether or not it will seek to extend the Undertaking for a Further Term and any other matters that ARTC considers should be the subject of review; and
(ii) invite submissions from Access Holders, the HVCCC and other Hunter Valley Coal Chain service providers, to make submissions to the ACCC and ARTC be made within a specified time, on the issues paper and any other matters relating to the Undertaking that interested parties consider relevant; and
(ii)(iii) upon the reasonable request of any Access Holder, the HVCCC or other Hunter Valley Coal Chain Service Provider,
meet with the requesting Access Holder, the HVCCC or other Hunter Valley Coal Chain Service Provider at ARTC’s earliest convenience to discuss the review under this section 2.3. .
(c) ARTC will consider in good faith any submissions on the issues paper by Access Holders, the HVCCC and other Hunter Valley Coal Chain service providers as part of its review under this section 2.3 and will promptly provide copies of all submissions to the ACCC.
(d) No later than 6 months after the Review Date, ARTC must lodge a variation application with the ACCC under section 44ZZA(7) of the CCA (Variation Application) seeking the approval of the ACCC to amend the Undertaking to:
(i) update the calculation of Depreciation and the Rate of Return for a Further Term, in accordance with this Undertaking;
(ii) extend the Term for a Further Term; and
(iii) make any other amendments which ARTC, in its discretion, reasonably considers necessary or appropriate,
(c) provided that ARTC
(i) must seek the approval of the ACCC to amend the Undertaking for the calculation of Depreciation and the Rate of Return by lodging a variation application with the ACCC under section 44ZZA(7) of the CCA but may, at any time in consultation with the consent of the ACCC and before the ACCCit makes a decision, simultaneously withdraw its Vvariation Aapplication and submit a revised Vvariation Aapplication to the ACCC. (“Variation Application”); and
(ii) may, in its absolute discretion, seek the approval of the ACCC to extend the Undertaking for a Further Term and any other amendments it considers appropriate.
(e) ARTC must extend the Term for a Further Term at each Review Date, unless it can reasonably demonstrate that all of the following are satisfied:
(i) the operation of the Undertaking for a Further Term would no longer meet the Objectives in section 1.2;
(ii) the expiration the Undertaking at the end of the current Term has been endorsed by the RCG on the basis of the 70% RCG endorsement threshold; and
(iii) ARTC has taken appropriate steps, acceptable to the ACCC, to provide for the continued effective operation of any current Access Holder Agreements after the end of the Term.
(f) In considering whether it is appropriate to accept a Variation Application lodged with it under section 2.3(d), without limitation of the
matters required to be considered under section 44ZZA(3) of the CCA, the ACCC must also have regard to:
(i) any matters raised in submissions made to ARTC or directly to the ACCC by other stakeholders, and whether those matters are appropriately reflected in the Variation Application;
(ii) whether the Variation Application appropriately facilitates the achievement of the Objectives and the Coal Chain Principles; and
(iii) whether any other amendments might reasonably facilitate the achievement of the Objectives and the Coal Chain Principles.
(g) No later than 18 months after the Review Date (unless otherwise specified in writing by the ACCC), the ACCC must provide written notice to ARTC whether it accepts or refuses to accept the Variation Application.
(h) If the ACCC refuses to accept the Variation Application, it must notify ARTC of:
(i) its reasons for the refusal;
(ii) the nature of the amendment or amendments that the ACCC requires to be made to the Undertaking; and
(iii) subject to section 2.3(h)(ii), the period within which ARTC is required to submit a request to the ACCC under section 44ZZA(7) of the CCA seeking to vary the Undertaking that complies with the notice.
(d)(i) If the ACCC:
(i) accepts the variation sought by ARTC, unless the ACCC decides otherwise, the Variation Application and amended terms will apply and be in force on the date which is 12 months after the Review Date (irrespective of the date of the ACCC’s decision); or
(ii) refuses to accept the variation sought by ARTC, ARTC or any other affected stakeholder must may apply to the Australian Competition Tribunal under section 44ZZBF of the CCA within the 21 day period for a review of the ACCC’s decision to refuse the Variation Application.
(e)(j) Following the Tribunal’s decision, ARTC must submit a revised variation application to the ACCC consistent with the Tribunal’s decision and seek the approval of the ACCC to vary this Undertaking in accordance with the process set out clauses 2.3(d) to (f).
(f) If :
(i) the ACCC approves an extension of the Undertaking for a Further Term the End Date will be deemed to be extended by that Further Term; or
(ii)(k) ARTC decides not to submit a variation application to the ACCC to extend the Undertaking for a Further Term, ARTC must within 3 months of completion of its review under this section 2.3 publish a report on its website setting out the reason for electing not to extend the Undertaking.
2.4 Variation of Undertaking
(a) Subject to section 2.4(b), ARTC may only vary the Undertaking with the consent of the ACCC under section 44ZZA(7) of the CCA.
(b) ARTC may vary from time to time the Costing Manual or Administrative HVAU Provisions subject to the following conditions:
(i) any variation to the Costing Manual or Administrative HVAU Provisions must be:
(A) be consistent with the objectives of this Undertaking set out in section 1.21.2;
(B) be consistent with the and pricing objectives set out in section 4.144.14; and
(i)(C) andnot unfairly discriminate between Access Holders or between Access Holders and access seekers; and
(ii) ARTC has undertaken a consultation process with, and obtained the endorsement of, the RCG in relation to the proposed variation in accordance with sections 2.4(c)2.4(c).
(c) ARTC may propose variations tovary the Costing Manual or Administrative HVAU Provisions by:
(i) at least 60 days before the proposed variation takes effect:
(A) providing the RCG and ACCC with written notice of the proposed variation setting out details of the proposed variation and inviting comments from each member of the RCG and ACCC; and
(B) publishing that notice on the ARTC website;
(ii) considering any issues raised by the ACCC, the RCG, Access Holders and other interested parties in relation to the proposed variation. ARTC may, where necessary:
(A) seek clarification and further details from the RCG, Access Holders, the ACCC and other interested parties; and /or
(B) make any modifications to the variation proposal which are acceptable to ARTC, acting in good faith, to reflect
the feedback (if any) received from Access Holders, the ACCC and other interested parties. To avoid doubt, any modifications to the variation proposal made in accordance with this section 2.4(c)(ii) will not require ARTC to recommence the consultation process or reissue a notice under section 2.4(c)(i);
(iii) consulting with the RCG on the proposed variation at the RCG meeting specified in the notice published under section 2.4(c)(i); and
(iv) obtaining the endorsement of the RCG to the proposed variation. For the purposes of endorsing changes to:
(A) the Costing Manual, the unanimous endorsement of RCG members is required; and
(B) or the Administrative HVAU Provisions, the endorsement of coal producers that hold Coal Access Rights under an Access Holder Agreement determined in accordance with section 9.2(f)9.2(f) and any coal KM included under section 9.2(g)9.2(g), with at least 70% of Contracted Coal KM on the Network and any coal KM included under section 9.2(g)9.2(g) will constitute endorsement by the RCG of the proposed variation (the “70% endorsement threshold”).
(v) Where the RCG has endorsed the proposed variation under section 2.4(c)(iv), ARTC will be required to make the endorsed variation.
(d) The RCG may propose variations to the Costing Manual or Administrative HVAU Provisions at any time during the Term in accordance with the following process:
(i) any member of the RCG may raise for RCG endorsement a variation proposal. The variation proposal will be taken as endorsed if in the case of the:
(A) Costing Manual – it has been unanimously endorsed; and
(B) Administrative HVAU Provisions – the 70% endorsement threshold is satisfied;
(ii) following RCG endorsement, the RCG will submit the variation proposal to ARTC;
(iii) ARTC must consider the variation proposal in good faith and consult with the RCG in relation to it;
(iv) if ARTC refuses to accept a variation proposal it must provide written reasons to the RCG within 14 days of having made its decision; and
(v) if the RCG disagrees with ARTC’s reasons for refusing to accept the variation proposal, the RCG may notify the dispute to the ACCC for arbitration in accordance with section 3.15 of this Undertaking.
(e) Any variation proposed by the RCG under section 2.4(d) must comply with the conditions in section 2.4(b)(i).
(iv)(f) For the avoidance of doubt, any dispute with respect to a proposed variation under this section 2.4 will be resolved in accordance with section 3.15.
2.5 Existing agreements and rights
This Undertaking applies only to the negotiation of new Access Agreements and the negotiation of Access Rights in addition to those already the subject of an Access Agreement. Subject to a negotiated Access Agreement being required to incorporate those clauses from the Indicative Access Holder Agreement identified as Tier 1 (mandatory) provisions for Coal in Schedule A:1 and Tier 1 (mandatory) Non-Coal provisions in Schedule A:2 (as applicable), nothing in this Undertaking can require a party to an existing Access Agreement to vary a term or provision of that agreement.
2.6 Insurance
ARTC will take out and maintain a liability insurance policy with a limit of not less than $250,000,000 for any one occurrence which provides an indemnity in respect of:
(a) loss of, loss of use of, and destruction or damage to, real or personal property;
(b) injury to, or disease or death of, persons; and
(c) ARTC’s liability prescribed in Access Agreements and the Operator Sub-Agreements to the extent coverable by insurance.
2.7 Contact details
(i) Australian Rail Track Corporation Limited 20 Newton Street
BROADMEADOW NSW 2292
Attention: Executive General Manager Hunter Valley Telephone: (02) 4941 9707
Facsimile: (02) 4952 0353
(ii) Australian Rail Track Corporation Limited Locked Bag 1
BROADMEADOW NSW 2292
(b) Applicants are also encouraged to search ARTC’s internet web site at www.artc.com.au on which will be published various information regarding ARTC and this Undertaking including:
(i) illustrative maps showing a geographical description of the Network in the form of Annexure 1 of Schedule B as amended by ARTC from time to time during the Term;
(ii) a narrative description of the Network;
(iii) Standard Access Charges for Services within the Services Envelope;
(iv) prices for which Access has been granted to Services outside of the Services Envelope, together with a general description of the Services to which such prices relate;
(v) the Network Management Principles;
(vi) the Indicative Access Holder Agreement including the Standard Operator Sub-Agreement;
(vii) current available market terms and conditions;
(viii) a copy of ARTC’s annual report;
(ix) details of Committed Capacity and other Capacity on the Network;
(x) indicative section running times for Services which have the Services Envelope characteristics;
(xi) route standards by corridor;
(xii) the Performance Indicators;
(xiii) RAB for each Segment;
(xiv) Ceiling Limit for the Constrained Network determined in the most recent annual compliance assessment; and
(xv) Hunter Valley corridor capacity strategy.
3 NEGOTIATING FOR ACCESS
3.1 Introduction
(a) ARTC will negotiate with an Applicant in good faith. This section of the Undertaking will form the framework for ARTC’s negotiations with an Applicant for Access Rights. However, ARTC recognises that the process needs to be flexible and ARTC will be willing to tailor the process in consultation with the Applicant.
(b) For Coal Access Rights, ARTC recognises the importance of the role performed by the HVCCC in providing advice on the operating requirements needed to deliver Coal Chain Capacity, as well as the role of the other Hunter Valley Coal Chain Service Providers. In particular, ARTC recognises the importance of the Applicant and ARTC consulting with the HVCCC and the Hunter Valley Coal Chain Service Providers to determine the impact on Coal Chain Capacity of the Access Rights sought by the Applicant. This consultation may occur before the submission of an Access Application as provided under section 3.7.
3.2 Framework
This section of the Undertaking seeks to outline the process which will be followed to enable an Applicant to gain Access Rights to the Network. It provides for:
(a) preliminary meetings and exchanges of information, including, in relation to Coal Access Rights, consultation with the HVCCC and other Hunter Valley Coal Chain Service Providers;
(b) submission of an Access Application by the Applicant;
(c) preparation of an Indicative Access Proposal by ARTC;
(d) negotiations to develop an Access Agreement for execution;
(e) dispute resolution procedures; and
(f) both ARTC and the Applicant to negotiate in good faith.
3.3 Information Provision
(a) Subject to section 3.3(b), ARTC will, if requested by an Applicant, provide the following information to the Applicant to assist with negotiations:
(i) path length availability;
(ii) for Coal Access Rights, referral to the Coal Chain Master Plan and Assumptions;
(iii) axle load limitations;
(iv) maximum allowable speeds;
(v) infrastructure characteristics;
(vi) applicable safe working requirements;
(vii) section run times;
(viii) the Incremental Cost and Economic Cost determined in accordance with the Undertaking for the Pricing Zones for which Access Rights are being sought; and
(ix) subject to section 3.3(b), other information relating to Capacity or Train operations reasonably required by the Applicant in relation to the Access Rights sought.
(b) ARTC's obligation under section 3.3(a) is subject to:
(i) ARTC not disclosing any information which would breach a confidentiality obligation binding on it; and
(ii) the Applicant agreeing to pay the reasonable costs incurred by ARTC in obtaining information that is not ordinarily and freely available to ARTC.
3.4 Parties to Negotiation
(i) the Applicant will nominate an Accredited Operator prior to utilising the Coal Access Rights sought;
(ii) that Operator will enter into an Operator Sub-Agreement agreed to by ARTC and the Access Holder and included as an annexure to the Access Holder Agreement; and
(iii) the Applicant will endorse the signed Operator Sub- Agreement.
ARTC will negotiate the terms of the Operator Sub-Agreement forming part of the Access Holder Agreement with the Access Holder or the relevant Operator where it has been appointed as the Access Holder’s agent for that purpose.
company establishing the Applicant’s ability to offload the anticipated coal at the Port of Newcastle.
(e) At any time, before or during the negotiation process, ARTC may require the Applicant to demonstrate to ARTC’s reasonable satisfaction that it is able to meet the following prudential requirements (“Prudential Requirements”):
(i) the Applicant and any proposed guarantor under a Parent Guarantee must be Solvent;
(ii) subject to sub-section (f), the Applicant, or a Related Body Corporate or Former Related Access Holder of the Applicant, must not be currently, or have been in the previous (2) two years, in Material Default of any agreement with ARTC, or any agreement in accordance with which access to rail infrastructure not managed by ARTC has been provided to the Applicant or a Related Body Corporate or Former Related Access Holder of the Applicant;
(iii) the Applicant has an Acceptable Credit Rating or will agree to provide credit support in the form of a Security or a Parent Guarantee before the Access Agreement becomes effective; and
(f) The prudential requirement in sub-section (e)(ii) does not apply to the extent the entity in Material Default is not the Applicant and was not a Related Body Corporate or Former Related Access Holder of the Applicant at the time of the Material Default.
(g) If ARTC refuses to negotiate for any reasons as described in section 3.4(a), 3.4(b), 3.4(c) or 3.4(d), it will, within ten (10) Business Days of the decision to refuse to negotiate, explain in writing to the Applicant the reasons for such refusal.
(h) If the Applicant considers that ARTC has unreasonably refused to commence or subsequently unreasonably ceased negotiations in accordance with section 3.4, then the Applicant may refer the matter to the arbitrator in accordance with section 3.15(f). If the arbitrator determines that ARTC has unreasonably refused to commence or subsequently unreasonably ceased negotiations, ARTC will recommence negotiations immediately.
(i) If at any time, ARTC is of the view that an Applicant’s request for Access Rights is frivolous in nature, ARTC may refer the request to the arbitrator in accordance with section 3.15(f) for determination. If
the arbitrator determines that the request is in fact frivolous, then ARTC will be entitled to cease negotiations and will not be obliged to comply with this Undertaking in respect of the request.
3.5 Confidentiality
(a) ARTC and the Access Holder acknowledge, subject to section 3.5(b) and (c), that all information provided by one party (“Provider”) to the other (“Receiver”) as part of the negotiation process for Access Rights under this Undertaking that is designated or indicated in writing, as being the confidential information of the Provider or any of its Related Bodies Corporates (“Confidential Information”) is secret and confidential and that the Receiver of Confidential Information will treat that Confidential Information as secret and confidential and the property solely of the Provider and not use that Confidential Information for any purpose other than the provisions of this Undertaking allow.
(c) For the purposes of this section 3.5, Confidential Information does not include information which is:
(i) in the public domain at the time of disclosure other than through the fault of the Receiver or of anyone to whom the Receiver has disclosed it;
(ii) obtained lawfully from a third party without restriction on use or disclosure;
(iii) required to be made public by operation of law (subject to the Receiver claiming any immunity, privilege or restriction on or from disclosure that it can reasonably claim), including without limitation information required by any stock exchange, rail safety or economic regulator; or
(iv) derived or produced from Confidential Information but disclosed in an aggregated form, on at least a Pricing Zone basis.
(d) ARTC and the Access Holder may disclose Confidential Information:
(i) necessary for the provision of advice by the Receiver’s legal advisers, financiers, accountants or other consultants (provided they are under a legal obligation not to disclose the Confidential Information to any third party);
(ii) to a Related Body Corporate (provided they are under a legal obligation not to disclose the Confidential Information to any third party);
(iii) subject to entering into appropriate confidentiality arrangements with the HVCCC and the RCG, to the HVCCC or the RCG to the extent reasonably necessary to enable the
HVCCC and RCG to co-ordinate the operation and capacity development of the Hunter Valley coal chain;
(iv) to an Operator to the extent that it is necessary or desirable for the parties to do so for the purposes of complying with contractual obligations under an Access Agreement or Operator Sub-Agreement;
(v) to the ACCC to the extent reasonably required to undertake its functions in relation to the Undertaking and the CCA;
(vi) subject to entering into appropriate confidentiality arrangements with the auditor, to an auditor appointed under section 4.11 of this Undertaking; or
(vii) to the lessor of the Network, if required under the terms of the NSW Lease.
3.6 Initial review where Coal Access Rights are sought
(a) Where an Applicant intends to seek Coal Access Rights and the Applicant has requested that ARTC take part in an initial review of Capacity requirements, ARTC will effectively and reasonably participate in that initial review subject to section 3.6(c).
(b) The purpose of the initial review is to assist the Applicant to provide sufficient information to the HVCCC to enable the HVCCC to determine the impact on Coal Chain Capacity of the Access Rights sought, and to provide advice to the Applicant on that impact and on the operating requirements needed to deliver Coal Chain Capacity and for the Applicant to determine how many Train Paths may be required.
(d) For the purposes of this section 3.6, effective and reasonable participation by ARTC and the other relevant Hunter Valley Coal Chain Service Providers means the provision of information to the Applicant, and where requested, the provision of information to the HVCCC, which it reasonably considers necessary to enable the HVCCC to advise the Applicant of the operating requirements to deliver the throughput sought and to carry out an assessment of the impact of the Access Rights sought on Coal Chain Capacity.
3.7 Access Application
(a) Requests for Access Rights are to be submitted to ARTC prepared in written form and clearly state that the Access Application is made in accordance with this Undertaking and is accompanied by the following information:
(i) Applicant details, including business name, ABN, ACN, business address and contact details;
(ii) Capacity requirements such as mode of operation, locations and time of entry and exit to the Network, or combination of load and discharge points for which Access Rights are required. For cyclic traffic, the number of monthly and annual train services required;
(iii) any requirements for Additional Capacity (subject to section 5);
(iv) additional above rail requirements;
(v) duration of the Access Rights sought;
(vi) the type of Service intended to utilise the Access Rights sought, contract requirements including (where applicable) Train speed, axle load and length, annual tonnages between load and discharge points, and task variability;
(vii) where applicable and available, details of the Operator or Operators likely to be nominated for each Train Path sought;
(viii) indication of Rolling Stock to be used; and
(ix) where an Applicant is seeking Coal Access Rights:
(A) subject to section 3.7(b), confirmation that the Applicant will have sufficient Network Exit Capability, for the lesser of the proposed contracted period for the Train Paths or ten years from the time when the Coal Access Rights will be available for use. Where the Coal Access Rights sought are for the purpose of transporting coal to the Port of Newcastle, ARTC may require the Applicant to provide a copy of its contract with the relevant port company establishing the Applicant’s ability to offload the anticipated coal at the Port of Newcastle; and
(B) any advice provided by the HVCCC on the impact of the Access Rights sought on Coal Chain Capacity, on the operating requirements needed to deliver Coal Chain Capacity, and on whether the Applicant has sufficient Network Exit Capability to enable the utilisation of the Coal Access Rights sought.
(b) If the Coal Access Rights sought are for the purpose of transporting coal to the Port of Newcastle, ARTC may accept an Access Application which does not meet the requirements of section 3.7(a)(ix)(A) provided the Applicant is able to establish to ARTC’s reasonable satisfaction that it is negotiating with the relevant port company to obtain sufficient Network Exit Capability to offload the anticipated coal volumes at the Port of Newcastle.
(c) Prior to submitting an Access Application, an Applicant may, in addition to the initial review where an Applicant is seeking Coal Access Rights, seek initial meetings with ARTC to discuss the Access
Application and to seek clarification of the process as outlined in this Undertaking and, in particular, the information to be included as part of an Access Application.
3.8 Acknowledgment
(a) Upon receiving an Access Application from an Applicant, ARTC will acknowledge receipt of the Access Application in writing (or electronically) to the Applicant within ten (10) Business Days of its receipt, or such longer period as specified in accordance with section 3.8(c).
(b) Prior to acknowledging the Access Application ARTC may seek:
(i) additional information where ARTC can reasonably demonstrate the need for such information for the purpose of preparing an Indicative Access Proposal; or
(ii) clarification of the information that has been provided in the Access Application.
(c) If ARTC seeks additional information or clarification in accordance with section 3.8(b), it will advise the Applicant of the additional information or the clarification required within ten (10) Business Days of receipt of the Access Application. Upon receiving the required information or clarification from the Applicant, ARTC will provide written acknowledgement of the receipt of the completed Access Application within ten (10) Business Days.
3.9 Determination of Capacity
(a) Subject to section 3.9(b), ARTC will use reasonable efforts to provide the Indicative Access Proposal to the Applicant within sixty (60) Business Days of the acknowledgment given under section 3.8.
(b) In assessing an Access Application, ARTC may consider that due to the complexity of the Access Application, a delay in the time taken to obtain information from the HVCCC or the Applicant relevant to the assessment of the Access Application, or other extenuating circumstances, it is not reasonable to provide an Indicative Access Proposal within sixty (60) Business Days. In these circumstances, ARTC will inform the Applicant in its acknowledgment of the Access Application that ARTC does not expect to provide an Indicative Access Proposal within sixty (60) Business Days and within a further ten (10) Business Days will advise the Applicant of its estimate of the time required to deliver the Indicative Access Proposal. Where the Applicant is of the view that the time estimated for preparation of the Indicative Access Proposal under this section 3.9(b), is excessive, then the Applicant may refer the matter to the arbitrator in accordance with section 3.15(f).
(c) ARTC will determine whether there is sufficient Available Capacity to accommodate the Access Rights sought by the Applicant on the basis of a Capacity Analysis carried out in accordance with section 5.2.
(d) If ARTC considers that there is not sufficient Available Capacity on the Network to provide the Applicant with the Access Rights sought, ARTC will, if requested by the Applicant, inform the Applicant of the reasons for its view and the Applicant may request Additional Capacity. ARTC will consider the Applicant’s request for Additional Capacity in accordance with section 8.4.
3.10 Indicative Access Proposal
(a) The Indicative Access Proposal will set out, amongst other things:
(i) the results of a Capacity Analysis determining whether there is sufficient Available Capacity to accommodate the requested Access Rights;
(ii) in the event the Access Application requires the Applicant to have recourse to Additional Capacity, an outline of the works and an indicative estimate of the cost of such works required to provide the Additional Capacity or an outline of the requirements for an investigation into the provision of Additional Capacity for the requested Access Rights;
(iii) advice in respect of the existence of other Applicants who have submitted an Access Application (where negotiations are continuing in accordance with this Undertaking) in respect of Access Rights which, if they were to be provided, would limit the ability of ARTC to provide Access Rights in accordance with the Indicative Access Proposal;
(iv) where the application is for Coal Access Rights, refer the Applicant to the HVCCC for any additional information in relation to Coal Chain Capacity;
(v) a reference to the Indicative Access Holder Agreement and a reference to the current available market terms and conditions as published on ARTC’s website;
(vi) an initial estimate of the Charges for the Access Rights, based on the pricing principles set out in section 4; and
(vii) details of the additional information required for ARTC to progress the proposal and further develop the Charges and terms and conditions for acceptance.
(b) The Indicative Access Proposal will, unless it contains specific provisions to the contrary, contain indicative arrangements only and does not oblige ARTC to provide Access Rights in accordance with specific terms and conditions, including Charges, contained within it.
(c) If, after sixty (60) Business Days following ARTC’s acknowledgment of the Access Application, or if applicable, after expiration of the time estimated by ARTC or determined by the arbitrator in accordance with section 3.9(b), the Applicant believes that ARTC is not making reasonable progress in the preparation of the proposal, then the Applicant may refer the matter to the arbitrator for a determination in
relation to the progress of the Indicative Access Proposal in accordance with section 3.15(f).
(d) In the event that ARTC is unable to provide an Indicative Access Proposal based on the Access Application, ARTC will, if possible, submit to the Applicant an Indicative Access Proposal offering alternative Access Rights which it reasonably believes may meet the Applicant’s requirements.
(e) Disputes arising from the process described in this section 3.10 will be resolved in accordance with section 3.15(f).
3.11 Negotiation
(a) If the Applicant intends to progress its Access Application under the negotiation process set out in this Undertaking on the basis of the arrangements outlined in the Indicative Access Proposal, the Applicant will notify ARTC of its intention to do so within thirty (30) Business Days of the date it receives the Indicative Access Proposal (or such other period of time that the parties agree). In the event that a notification is given after this period of time, ARTC will review the Indicative Access Proposal and, if considered necessary by ARTC, prepare a revised Indicative Access Proposal in accordance with section 3.10 and the negotiation process outlined in this section 3 will recommence from that point.
(c) ARTC will take all reasonable steps to respond to the concerns raised by the Applicant in relation to the Indicative Access Proposal under section 3.11(b) within thirty (30) Business Days of receipt of notification of the concerns. If ARTC is unable to address the concerns of the Applicant within such time frame, ARTC will notify the Applicant in writing as to the reasons why and advise an intended course of action, with indicative time frames, of how the concern is being addressed. If the Applicant is satisfied with the response received from ARTC, including any revision to the Indicative Access Proposal, it will notify ARTC of its intention to proceed with negotiations within thirty (30) Business Days of receiving ARTC’s response.
(d) If the Applicant is not satisfied with the response from ARTC, including any revision to the Indicative Access Proposal, the Applicant may seek to resolve the dispute in accordance with the dispute resolution process outlined in section 3.15. The Applicant will commence this dispute resolution process within thirty (30) Business Days of receiving ARTC’s response.
3.12 Negotiation Process
(a) If the Access Applicant indicates its willingness to progress negotiations under this section 3.12, then both parties will commence negotiations as soon as reasonably possible to progress towards an Access Agreement.
(b) The negotiation period will commence upon the Applicant providing a notification to ARTC of its intention to proceed pursuant to section 3.12(a) and will cease upon the earlier of:
(i) execution of an Access Agreement in respect of the Access Rights sought by the Applicant;
(ii) written notification by the Applicant that it no longer wishes to proceed with its Access Application;
(iii) the expiration of three (3) months from the commencement of the negotiation period, or if both parties agree to extend the negotiation period, the expiration of the agreed extended period;
(iv) if ARTC believes that the negotiations are not progressing in good faith towards the development of an Access Agreement within a reasonable time period, issue of a notice by ARTC informing the Applicant that it does not believe the negotiations are progressing in good faith towards the development of an Access Agreement within a reasonable time period and that ARTC intends to end the negotiation period;
(v) if section 3.12 applies and ARTC refers the matter to the arbitrator under section 3.15(f) for a determination on this issue and such determination is found in ARTC’s favour, the date of issue of the determination;
(vi) where an Applicant is seeking Coal Access Rights, ARTC receives evidence confirming that the Applicant no longer satisfies the Network Exit Capability requirement in section 3.7(a)(ix), ARTC may issue a notice of intent to end the negotiation period, to become effective ten (10) Business Days after the issue of the notice. Where ARTC issues a notice of intent, ARTC will provide to the Applicant written reasons for its decision to end the negotiation period; or
(vii) if ARTC receives evidence confirming that the Applicant no longer satisfies the prudential requirements of section 3.4(e), on receiving such evidence ARTC will advise the Applicant of such evidence and if the Applicant is not willing to provide Security or a Parent Guarantee, ARTC may issue a notice of intent to end the negotiation period, to become effective ten
(10) Business Days after the issue of the notice. Where ARTC issues a notice of intent, ARTC will provide to the Applicant written reasons for its decision to end the negotiation period.
(c) Upon cessation of the negotiation period, ARTC will be entitled to cease negotiations with the Applicant.
3.13 Application for mutually exclusive Access Rights
(a) This section 3.13 applies to the extent two or more Applicants have submitted an Access Application for Access Rights to Available Capacity existing and commissioned at the time each of the Access Applications is received, each of which satisfies the requirements of section 3.7(a)(ix)(A) and it is not reasonably possible for ARTC to fulfil, in whole, the request for Access Rights made under those Access Applications (each a “Mutually Exclusive Access Application”).
(b) An Access Application may become a Mutually Exclusive Access Application at any time before an Access Agreement is executed pursuant to that Application.
(c) An Applicant will be notified as soon as practicable after ARTC has identified that its Application has become a Mutually Exclusive Access Application and the extent to which the Access Rights sought are affected.
(d) ARTC will, if requested, provide reasonable assistance to an access seeker to identify whether its Access Application can be modified so that it is no longer a Mutually Exclusive Access Application.
(e) Subject to section 3.13(f), ARTC will allocate the affected Access Rights to the Applicant under a Mutually Exclusive Access Application who accepts an Access Agreement with ARTC which, in the opinion of ARTC, is most favourable to it. Unless impracticable, ARTC would make such a decision based on the Access Agreement that represented the highest present value of future returns to ARTC after considering all risks associated with the Access Agreement (including the relative time likely to be required to finalise an Access Agreement with each party).
(f) If in ARTC’s reasonable opinion, two or more Mutually Exclusive Access Applications, which relate to Coal Access Rights, provide ARTC with a comparable present value of future returns to ARTC determined in accordance with section 3.13(e) and after considering all risks associated with the Access Agreements, ARTC will offer to allocate the affected Access Rights on a pro rata basis to the relevant Applicants.
For example, ARTC would offer to pro-rate the affected Access Rights to export producers if the two applications satisfied certain criteria including the same zone, same terms and conditions and the term of each was greater than 10 years.
(g) To avoid doubt, if an Access Holder seeks to renew Coal Access Rights in accordance with a specific right of renewal provided in its Access Holder Agreement, that request for a renewal will not be treated as an Access Application and will have, to the extent provided in the Access Holder Agreement, priority over an Access Application for Access Rights which are mutually exclusive with the Coal Access Rights sought to be renewed.
3.14 Access Agreement
(a) The granting of Access Rights will be finalised by the execution of an Access Agreement. The parties to the Access Agreement will be ARTC and the Applicant.
(b) Subject to section 3.14(c), ARTC will offer Applicants the choice of the following as an Access Agreement:
(i) subject to the Applicant satisfying the Network Exit Capability requirement in section 3.7(a)(ix) and the prudential requirements in section 3.4(e), for Applicants seeking Coal Access Rights:
(A) the Indicative Access Holder Agreement subject to the Applicant seeking Access Rights intended for the operation of Services within the Services Envelope;
(B) an updated Access Holder Agreement to reflect agreed amendments to the Indicative Access Holder Agreement. A negotiated Access Holder Agreement will incorporate those clauses from the Indicative Access Holder Agreement identified as Tier 1 (mandatory) provisions in Schedule A:1 and will, (unless otherwise agreed between ARTC and the Applicant) at least address those provisions identified as Tier 2 (negotiable) provisions in Schedule A:1, as applicable to the destination of the Coal Access Rights sought. The details of Schedule A:1 do not provide an exhaustive list of the issues that may be included in an Access Holder Agreement; or
(C) current available market terms and conditions in the form of an Access Holder Agreement which had been negotiated and agreed by ARTC and an Access Holder in accordance with section 3.14(b)(i)(B), as published on ARTC’s website, as applicable;
(ii) for Applicants seeking Non-Coal Access Rights:
(A) subject to the Applicant satisfying those prudential requirements in section 3.4(e)(i), (ii) and (iv), an Access Agreement on the terms and conditions contained in the Indicative Interstate Access Agreement but amended to:
(i) define the network covered by the Access Agreement as the Network subject to this Undertaking;
(ii) incorporate those provisions identified as Tier 1 (mandatory) Non Coal Provisions in Schedule A:2;
(iii) delete the section relating to extensions and additional capacity (being clause 4.7 as at the
Commencement Date) to the extent it relates to the Network;
(iv) any other amendments reasonably considered necessary to take into account the particular circumstances of the Hunter Valley and to be consistent with the terms of this Undertaking,
but to avoid doubt the Access Rights sought by the Applicant will not be considered an indicative service for the purposes of the Indicative Interstate Access Agreement and those terms and conditions applicable to an indicative service in the Indicative Interstate Access Agreement will not apply;
(B) an updated Access Agreement to reflect agreed amendments to the terms and conditions of the Indicative Interstate Access Agreement. A negotiated Access Agreement will incorporate those provisions identified as Tier 1 (mandatory) Non-Coal provisions in Schedule A:2 and will, unless otherwise agreed between ARTC and the Applicant, at least address those provisions identified in Schedule A:2 as Tier 2 (negotiable) Non-Coal provisions; or
(C) the current available market terms and conditions in the form of an Access Agreement for Non-Coal Access Rights which had been negotiated and agreed by ARTC and an Access Holder in accordance with section 3.14(b)(ii)(B) as published on ARTC’s website, as applicable.
(c) ARTC must offer the Indicative Access Holder Agreement to an Applicant for Coal Access Rights:
(i) if the Applicant seeks Access Rights for the operation of a Service within the Services Envelope;
(ii) if the Applicant meets the Network Exit Capability requirement in section 3.7(a)(ix) and the prudential requirements in section 3.4(e); and
(iii) either:
(A) the Network has sufficient Available Capacity to meet the Applicant’s needs; or
(B) ARTC consents to provide Additional Capacity to meet the Applicant’s needs in accordance with section 8;
(d) Once the Applicant has notified ARTC that it is satisfied with the terms and conditions of the Access Holder Agreement as drafted, ARTC will, as soon as reasonably practicable, provide a final Access Holder Agreement (or, if applicable, an amendment to an existing Access Agreement) to the Applicant for execution.
(e) Where ARTC offers an Access Holder Agreement and the Applicant accepts the terms and conditions offered in that Access Holder Agreement, both ARTC and the Applicant will execute the Access Holder Agreement. The parties will use reasonable endeavours to comply with this sub-section 3.14(e) as soon as practicable.
3.15 Dispute resolution
(a) If any dispute arises under this Undertaking or in relation to the negotiation of Access Rights between an Applicant and ARTC (“Dispute”) then, unless otherwise expressly agreed to the contrary by both parties, such Dispute will be resolved in accordance with this section 3.15 and either party may give to the other party to the Dispute notice in writing (“Dispute Notice”) specifying the Dispute and requiring it to be dealt with in the manner set out in this section 3.15. The parties will use reasonable endeavours acting in good faith to settle the Dispute as soon as is practicable.
(b) An Operator who has been appointed agent for the Access Holder as contemplated in section 3.4(b) may, with that Access Holder’s prior written consent, participate in a dispute notified by that Access Holder under this section 3.15 in relation to the Operator Sub-Agreement in which case, ARTC, the Operator and the Access Holder will be the parties to the Dispute.
(c) Disputes in relation to an Access Agreement once executed will be dealt with in accordance with the provisions of that Access Agreement and are not dealt with under this Undertaking. To avoid doubt, disputes raised in accordance with sections 4.16(e) and 4.18(f) will be dealt with in accordance with section 3.15(f) of the Undertaking.
(d) Negotiation
Within five (5) Business Days of a party giving the other party a Dispute Notice, senior representatives from each party will meet and use reasonable endeavours, acting in good faith, to resolve the dispute by joint discussions.
(e) Mediation
(i) If the Dispute is not resolved under section 3.15(d) within ten
(10) Business Days after the date of the Dispute Notice then:
(A) if the parties agree, they will attempt to resolve the Dispute by mediation pursuant to this section 3.15(e); or
(B) if the parties do not wish to resolve the Dispute by mediation under this section 3.15(e), either party may, by notice in writing to the other and the arbitrator, refer the Dispute to be determined by arbitration under section 3.15(f).
officers of both parties who will attempt to resolve the Dispute, including by informal mediation.
(iii) If the Dispute is not resolved within a further ten (10) Business Days after being referred to the chief executive officers under section 3.15(e)(ii), the Dispute will be referred to formal mediation in New South Wales by a single mediator appointed by agreement of the parties, or if they fail to agree within ten
(10) Business Days, appointed by the President of the Law Society of New South Wales acting on the request of either party.
(iv) Unless the parties agree otherwise:
(A) the mediation will be conducted by a mediator under the “The Law Society Guidelines for those involved in Mediations of the Law Society of New South Wales”;
(B) each party may appoint a person, including a legally qualified person to represent it or assist it in the mediation;
(C) each party will bear its own costs relating to the preparation for and attendance at the mediation; and
(D) the costs of a mediator will be borne equally by the parties.
(f) Arbitration
(i) If the Dispute is not resolved under section 3.15(d), or at any time after the appointment of the mediator (if any) under section 3.15(e), either party may by notice in writing to the other and the arbitrator terminate the mediation proceedings and notify the arbitrator of a Dispute to be determined by arbitration under this section 3.15(f). If the Applicant serves notice on the arbitrator under this section 3.15(f), that notice will also include an agreement by that Applicant to:
(A) pay the amounts and rates described in section 3.15(f)(ii)(M); and
(B) indemnify the arbitrator from any claims made against the arbitrator arising in connection with the performance by the arbitrator of its duties under section 3.15(f), such indemnity excluding circumstances where the conduct of the arbitrator constitutes wilful negligence, dishonest or unlawful conduct.
(ii) Where a Dispute is referred to arbitration in accordance with this section 3.15(f), the following will apply:
(A) The arbitrator will be the ACCC. For the purposes of a particular arbitration, the arbitrator is to be constituted
by two (2) or more members of the ACCC nominated in writing by the chairperson of the ACCC.
(B) The arbitrator will not proceed with the arbitration unless and until the Applicant has agreed to pay costs in accordance with the amounts or rates described in section 3.15(f)(ii)(M); as determined by the arbitrator under that section.
(i) the arbitrator will observe the rules of natural justice but is not required to observe the rules of evidence;
(ii) a party may appoint a person, including a legally qualified person, to represent it or assist it in the arbitration; and
(iii) the arbitrator will include in the determination findings on material questions of law and fact, including references to evidence on which the findings of fact were based.
(D) The arbitrator will when conducting the arbitration:
(i) proceed as quickly as is possible and consistent with a fair and proper assessment of the matter;
(ii) while having the right to decide on the form of presentations, encourage a written presentation by each party with exchange and with rebuttal opportunities and questioning by the arbitrator;
(iii) call on any party the arbitrator believes necessary to give evidence;
(iv) decide how to receive evidence and consider the need to keep evidence confidential and the need to protect the confidentiality of the arbitration process;
(v) present their determination in a draft form to the parties and hear argument from the parties before making a final determination; and
(vi) hand down a final determination in writing which includes all their reasons for making the determination.
(E) The arbitrator may at any time terminate an arbitration (without making an award) if it thinks that:
(i) the notification of the dispute is vexatious;
(ii) the subject matter of the dispute is trivial, misconceived or lacking in substance; or
(iii) the party who notified the dispute has not engaged in negotiations in good faith.
(F) In deciding a dispute, the arbitrator will take into account:
(i) the principles, methodologies and provisions set out in this Undertaking;
(ii) the objectives and principles enunciated in Part IIIA of the CCA and the Competition Principles Agreement;
(iii) ARTC’s legitimate business interests and investment in the Network;
(iv) all costs that ARTC incurs in providing Access Rights, including any costs of extending the Network, but not costs associated with losses arising from increased competition in upstream or downstream markets;
(v) the economic value to ARTC of any additional investment that the Applicant or ARTC has agreed to undertake;
(vi) the interests of all persons who have rights to use the Network;
(vii) the operational and technical requirements necessary for the safe and reliable operation of the Network;
(viii) the economically efficient operation of the Network;
(ix) the benefit to the public from having competitive markets; and
(x) any other matters that the arbitrator thinks are appropriate to have regard to.
(G) In making its determination, the arbitrator:
(i) may deal with any matters referred to in section 44V of the CCA;
(ii) will not make a determination that would have any of the effects described in section 44W of the CCA;
(iii) will take into account the matters referred to in section 44X of the CCA; and
(iv) otherwise comply with section 3.15(f)(ii)(C).
(H) The arbitrator may publish its determination at its discretion subject to consideration of submissions by either party to the arbitration which are commercially sensitive or contain confidential information. At any time prior to the making of the determination, either party may give notice to the arbitrator of the information supplied by it which is either commercially sensitive to it or subject to confidentiality obligations, including the reasons why such information is commercially sensitive or confidential. After considering such submissions, the arbitrator may decide not to publish as part of its determination the information that is commercially sensitive or confidential to either party to the arbitration.
(I) The arbitrator may join the conduct of separate arbitrations if the arbitrator considers that:
(i) there are one or more issues common to the arbitrations; and
(ii) the joining of the arbitrations will not unreasonably delay the process, or unreasonably increase the costs, of the arbitrations.
(J) The arbitrator may join one or more additional persons as a party to an arbitration if:
(i) the person applies in writing to be made a party and can demonstrate to the arbitrator an interest which is significant enough to reasonably warrant being made a party; and
(ii) the arbitrator considers that making the additional person a party to the arbitration will not unreasonably delay the process, or unreasonably increase the costs, of the arbitration.
(K) If the arbitrator joins the conduct of separate arbitrations or joins an additional person as a party to the arbitration, the arbitrator will have regard to the wishes of the parties and the need for commercial confidentiality in determining how it will conduct the arbitration.
(L) The determination of the arbitrator will be final and binding subject to any rights of review by a court of law.
(M) The arbitrator may charge for its costs of conducting an arbitration of a dispute the amounts and rates (if any) prescribed by the Competition and Consumer Regulations 2010 (Cth). If the Competition and Consumer Regulations 2010 (Cth) do not prescribe such amounts or rates, the arbitrator may charge the amounts and rates mentioned in regulation 6F of those regulations as amended from time to time.
(N) The costs of the parties to the arbitration will be borne by the parties in such proportions as the arbitrator determines. Each party may make submissions to the arbitrator on the issue of costs at any time prior to that determination.
(O) Except where the determination or direction is subject to a review by a court of law, if an Applicant does not comply with a determination or direction of the arbitrator, then ARTC will no longer be obliged to continue negotiations regarding the provision of Access Rights to that Applicant.
(P) Except where the determination or direction is subject to a review by a court of law, ARTC will comply with the lawful directions or determinations of the arbitrator.
(Q) ARTC will indemnify the arbitrator from any claims made against it arising in connection with the performance by the arbitrator of its duties under this section, such indemnity excluding circumstances where the conduct of the arbitrator constitutes wilful negligence, dishonest or unlawful conduct.
4 ACCESS PRICING PRINCIPLES
4.1 Price
The Charge to an Access Holder will include a price negotiated in accordance with the principles set out in this Undertaking.
4.2 Floor Revenue Limits
(a) Access revenue from every Access Holder must at least meet the Direct Cost imposed by that Access Holder.
(b) For each Segment or group of Segments, Access revenue from Access Holders should, as an objective, meet the Incremental Cost of those Segments (“Floor Limit”).
4.3 Ceiling Revenue Limits
(a) In relation to Segments identified as forming part of Pricing Zone 1 and 2 in Schedule E, Access revenue from any Access Holder, or group of Access Holders must not exceed the sum of:
(i) the Economic Cost of those Segments which are required on a stand alone basis for the Access Holder or group of Access Holders (“Ceiling Limit”); and
(a)(ii) any revenue increments or decrements determined in accordance with section 9.3 and arising from the operation of the Operational Efficiency Incentive Scheme. .
(b) In relation to Segments identified as forming part of Pricing Zone 3 in Schedule E, the Access revenue from any Access Holder, or group of Access Holders must not exceed the sum of:
(i) the Ceiling Limit where the RAB for those Segments is equal to, or falls below, the RAB Floor Limit for those Segments at the end of the calendar year (t -1); and
(b)(ii) any revenue increments or decrements determined in accordance with section 9.3 and arising from the operation of an Operational Efficiency Incentive Scheme.
(c) Access revenue for the purposes of this section 4.3 does not include:
(i) Access revenue returned to a Contributor as a result of the operation of a user funding agreement between the Contributor and ARTC; and
(ii) any Innovation Payment; and
(ii) any Efficiency Incentive Amount.
(iii) [Drafting Note: any opex efficiency regime is to operate within the current building block framework and not as a standalone, unregulated charge outside of the Ceiling Limit.]
4.4 Regulatory Asset Base
(a) The Regulatory Asset Base (“RAB”) for a Segment or group of Segments, will be determined in accordance with this section 4.4.
(b) The initial value of the RAB (“Initial RAB”) will be:
(i) in relation to those Segments that have been ascribed a regulatory asset value in accordance with the 2011 Hunter Valley Access Undertaking in force at the time immediately preceding the Commencement Date, set at the value of those Segments determined in accordance with the 2011 Hunter Valley Access Undertaking and rolled forward to the Commencement Date in accordance with the asset valuation roll forward principles under the 2011 Hunter Valley Access Undertaking and as approved by the ACCC under section 15.1(b)(i) ; and
(ii) in relation to other segments not forming part of the Network as at the Commencement Date, initially valued using the depreciated optimised replacement cost method of valuing assets, and approved by the ACCC. The optimised replacement
cost means the cost of replacement by commercially efficient application of best known currently available technology based on existing capacity and performance characteristics of the asset.
(c) The initial value of the RAB Floor Limit (“Initial RAB Floor Limit”) will be:
(i) in relation to those Segments that have been ascribed a regulatory asset value in accordance with the 2011 Hunter Valley Access Undertaking in force at the time immediately preceding the Commencement Date, set at the value of those Segments determined in accordance with the 2011 Hunter Valley Access Undertaking and rolled forward to the Commencement Date in accordance with the asset valuation roll forward principles under the 2011 Hunter Valley Access Undertaking and as approved by the ACCC under section 15.1(b)(i); and
(ii) in relation to other segments not forming part of the Network as at the Commencement Date, initially valued using the depreciated optimised replacement cost method of valuing assets, and approved by the ACCC. The optimised replacement cost means the cost of replacement by commercially efficient application of best known currently available technology based on existing capacity and performance characteristics of the asset.
(d) Determination of RAB for Pricing Zone 3
In relation to the Segments identified as forming part of Pricing Zone 3 in Schedule E, the RAB will be rolled forward annually according to the following methodology:
RABt start =RABt-1 end =
(1 + RoR) x RABt-1 start – Out-turn Revenuet-1 + Out-turn Opext-1 + Net Capext-1 x (1 + 0.5 x RoR)
where:
RABt start is RAB at the start of the relevant calendar year (t) (which, for the first year following the Commencement Date or the New Segments Commencement Date (as applicable), would be the Initial RAB).
RABt-1 end is the RAB at the end of the preceding calendar year (t-1). RABt-1 start is the RAB at the start of the preceding calendar year (t-1). RoR is the nominal pre tax Rate of Return.
Out-turn Revenuet-1 is the total Access revenue earned by ARTC in the preceding calendar year (t-1) but will not include:
(i) a Capital Contribution received from an Applicant or an Access Holder; or
(ii) Access revenue returned to a Contributor as a result of the operation of a user funding agreement between the Contributor and ARTC.
Out-turn Opext-1 is the total operating expenditure incurred by ARTC in the preceding calendar year (t-1), on an Efficient basis, determined in accordance with sections 4.5(a)(i), (iv) to 4.5(a)(vi)and 4.5(b).
Net Capex t-1 is the net additions to the RAB in the preceding calendar year (t-1) which is calculated as:
(i) the Prudent Capital Expenditure incurred by ARTC in the calendar year (t-1); plus
(ii) interest cost incurred during construction up until 1 July in the calendar year the asset was commissioned, determined by reference to the relevant form of the Rate of Return (to the extent that Capital Expenditure is incurred on a Prudent basis, including interest cost); less
(iii) the opening escalated value reduced by accumulated depreciation, of any assets disposed of in the calendar year (t- 1).
To avoid doubt, Net Capex t-1 does not include Capital Contributions.
(e) Determination of RAB Floor Limit
The RAB Floor Limit for a Segment or group of Segments will be:
(i) as at the Commencement Date, the Initial RAB Floor Limit;
(ii) rolled forward annually according to the following methodology RAB Floor Limitt start = RAB Floor Limitt-1 end =
(1 + CPIt-1) x RAB Floor Limitt-1 start + Net Capext-1 – Depreciationt-1
where:
RAB Floor Limitt start is the RAB Floor Limit at the start of the relevant calendar year (t) (which, for the year in which the Commencement Date occurs, would be the Initial RAB Floor Limit).
RAB Floor Limitt-1 end is the RAB Floor Limit at the end of the calendar year (t-1).
RAB Floor Limitt-1 start is the RAB Floor Limit at the start of the calendar year (t-1).
CPIt-1 is the inflation rate for the calendar year (t-1), determined by reference to the CPI for the September quarter of that year.
Net Capext-1 is the net additions to the RAB Floor Limit in the calendar year (t-1) which is calculated as:
(iii) the Prudent Capital Expenditure incurred by ARTC in the calendar year (t-1); plus
(iv) interest cost incurred during construction up until 1 July in the calendar year the asset was commissioned, determined by reference to the relevant form of the Rate of Return (to the extent that Capital Expenditure is incurred on a Prudent basis, including interest cost); less
(v) the opening escalated value reduced by accumulated depreciation, of any assets disposed of in the calendar year (t- 1).
To avoid doubt, Net Capext-1 does not include Capital Contributions.
4.5 Depreciationt-1 is Depreciation applicable to the RAB Floor Limit in the calendar year (t-1).Economic cost
(a) For the purposes of this section 4, the Economic Cost of a Segment in relation to a calendar year (t-1) means:
(ii) Depreciation of Segment Specific Assets, where the value of those assets is determined in accordance with section 4.4(e);
(iii) a return on Segment Specific Assets, being determined by applying the real pre-tax Rate of Return to (RAB Floor Limitt-1 start + RAB Floor Limitt-1 end) * 0.5, where the value of the RAB Floor Limit is determined in accordance with section 4.4(e);
(iv) an allocation of Non-Segment Specific Costs;
(v) an allocation of depreciation of Non-Segment Specific Assets, determined in accordance with the Costing Manual; and
(b) All costs described in sub-sections (a)(i), (iv), (v) and (vi) and all operating expenditure in section 4.4(b) and 4.4(d) are to be assessed on an Efficient basis.
(c) All costs are to be assessed on a stand alone basis.
(d) To avoid doubt, nothing in this section 4 will prevent ARTC from charging Contributors and other Access Holders TOP Charges and non-TOP Charges as a result of the operation of a user funding agreement between Contributors and ARTC, in which case the TOP Charges and non-TOP Charges will be charged in accordance with section 10.2.
4.6 Cost allocation
(a) For the purposes of section 4.5, Non-Segment Specific Costs and depreciation of, and return on, Non-Segment Specific Assets will be allocated to Segments in accordance with the following principles and the Costing Manual:
(i) where possible, costs will be directly attributed to a Segment;
(ii) where possible, Non-Segment Specific Costs and Non- Segment Specific Assets will be identified with the Hunter Valley corridor, other ARTC corridors or identified as system- wide;
(iii) Non-Segment Specific Costs and depreciation of, and return on, Non-Segment Specific Assets identified with the Hunter Valley corridor or other ARTC corridors, or identified as system-wide, will be allocated to those parts of Segments in the Hunter Valley corridor or in other ARTC corridors, or, where identified as system wide, to Segments owned, leased or licensed by ARTC respectively.
(b) All costs will comprise ARTC’s reasonably anticipated costs over a reasonable future timeframe.
(b)
4.7 Depreciation of Segment Specific Assets
For the purposes of calculating the Depreciation allowance for Segment Specific Assets in any calendar year:
(a) Depreciation is to be calculated for each calendar year, using a straight line methodology (unless otherwise agreed with an Access Holder and approved by the ACCC) with respect to specific assets and the estimate of the remaining useful life of the assets.
(a)(b) For the purpose of determining Depreciation during the period from 1 July 2016 to the first Review Date, the remaining weighted average mine life for all Operating Mines and Prospective Mines as at 1 July 2016 is taken to be 22 years.
(b)(c) The useful life of a Segment or group of Segments at each mandatory review pursuant to 2.3(a) is to be determined having regard to:
(i) the average remaining mine life of all Operating Mines and Prospective Mines coal mines utilising either the Network as a whole or the Pricing Zone of which that Segment or group of Segments forms part;
(ii) for each Operating Mine – the average remaining mine life is to be determined by reference to current estimates of the mine production rate and marketable, proven and probable reserves derived using the latest NSW Coal Industry Report, if still current, and other relevant publicly available information (or, if
no relevant information is publicly available, any reasonable estimates provided by the owners of Operating Mines);
(iii) for each Prospective Mine – the average remaining mine life is to be determined by reference to current estimates of the mine production rate and total reserves derived using the latest NSW Coal Industry Report, if still current, and other relevant publicly available information (or, if no such information is publicly available, any reasonable estimate provided by the proponents of the relevant Prospective Mines);
(iv) the weighted average mine life across mines within the Network or Pricing Zone, as at the time of publication of the reserves and production rate data, is to be calculated as follows:
() = ∑( x )
Where
(%) = and probable r
= Operating Mines and Prospective Mines
for Operating Mines:
() =
= operating coal mines
(i) = Production as reported in the NSW Coal Industry Report
(ii)(v) the estimate of weighted average mine life is to be aligned with the date on which it is to be used for calculating the Depreciation allowance, by reducing the estimate derived under subsection (iv) above by any amount of time between the publication of the reserves and production rate data used in the calculation and the date on which it is to be used to calculate the Depreciation allowance.average mine production levels anticipated during the Term having regard to Coal Chain Capacity at any time; and
(iii) marketable coal reserves estimated for each mine existing at the time of the Commencement Date or Variation Application or expected to commence during the 5 year period following the Commencement Date or Variation Application.
The average remaining mine life of coal mines may be determined by ARTC on a Network wide basis or may vary between Pricing Zones as approved by the ACCC.
(d) Depreciation is to be charged each year on the inflation adjusted opening balance of the RAB Floor Limit and on the Prudent Capital Expenditure associated with all of the assets commissioned in that year, charged for a period of half of that year.
(e) In this section 4.7:
(i) a reference to an Operating Mine means a mine that is capable of operating as at the Review Date, including for the avoidance of doubt any mine that has been placed into care and maintenance (in which case the production rate as at the date that the mine was placed into care and maintenance will be deemed to continue to apply for the purpose of section 4.7(c)) and any operating mine for which continued operations are or will become subject to the renewal of any licence, approval or other regulatory requirement during the remaining Term or a Further Term;
(ii) a reference to a Prospective Mine means a mine or project in relation to which the proponent can reasonably demonstrate to ARTC that any of the following apply:
(A) all reasonably necessary project approvals have been obtained;
(B) contracts have been executed for Network Exit Capability sufficient to provide for the delivery and export of any coal forecast to be produced over the remaining Term or any Further Term; and
4.8 Rate of return
(c)(C) in all other cases, there is otherwise a reasonable expectation that the mine will commence operations and coal will be produced within five years of the Review Date.
(a) In any review of the Rate of Return under section 2.3, the following method and inputs are to be used:
(i) the Rate of Return is to be calculated as a weighted average of the cost of debt and the cost of equity, assuming a gearing ratio of 52.5%;
(ii) the cost of equity is to be estimated using the Sharpe Lintner Capital Asset Pricing Model;
(iii) the market risk premium is to be determined for the remainder of the Term and the Further Term, provided that it must fall within the range of 5.5% to 6.5%;
(iv) the equity beta is to determined:
(A) based on an estimate of the asset beta which reflects the degree of systematic, non-diversifiable risk faced by ARTC in providing the Services, estimated using a
representative sample of sufficiently comparable Australian regulated utilities; and
(B) applying the Monkhouse formula to lever the asset beta estimate.
(v) the risk-free rate is to be the prevailing yield on 10-year Commonwealth Government Securities averaged over the 20 business days leading up to (and including) the Review Date;
(vi) the debt risk premium is to be calculated as the margin between the risk-free rate and the prevailing yield on 10-year BBB-rated corporate bonds, with this yield to be estimated as follows:
(A) using the yield estimates published by the Reserve Bank of Australia (RBA) for non-financial corporate BBB-rated bonds with a 10-year target tenor. If yield estimates for BBB-rated corporate bonds with a 10-year tenor are not available from the RBA, estimates for the longest available tenor up to 10 years are to be used;
(B) if the RBA has ceased publication of yield estimates for non-financial corporate BBB-rated bonds, yield estimates for BBB-rated corporate bonds with a 10-year tenor are to be taken from a similarly reputable data provider. If estimates for BBB-rated corporate bonds with a 10-year tenor are not available from that data source, estimates for the longest available tenor up to 10 years are to be used;
(C) to determine an estimate of the prevailing yield, yield estimates are to be averaged over the same 20-day period that is used to estimate the risk-free rate. Where only monthly estimates are available from the relevant data source, these monthly estimates are to be interpolated using linear interpolation to derive daily estimates for each day within the 20-day averaging period;
(vii) the allowance for debt raising costs is to be 0.095%;
(viii) the assumed value of imputation credits (gamma) is to be within the range of 0.25 to 0.45, provided that during the period from the Commencement Date to the first Review Date, the assumed value of gamma is to be 0.25;
(ix) the corporate tax rate is to be equal to the rate of company tax payable under applicable income tax legislation, as in force at the Review Date;
(x) the inflation rate is to be based on the annual rate of consumer price index (CPI) inflation for ‘Sydney (All Groups)’, excluding housing, as reported by the Australian Bureau of Statistics for
the most recently completed quarter prior to the Review Date; and
(xi) the value of inflation used in the determination of weighted average cost of capital will be the same value used to index the regulatory asset base. For the Term of the Undertaking, the real pre-tax Rate of Return is 6.74% and the nominal pre-tax Rate of Return is 8.50%.
4.9 Unders and overs accounting
(a) Unders or overs accounting is the outcome of the reconciliation of Access revenue with applicable Ceiling Limits undertaken by ARTC as part of the annual ACCC compliance assessment under section 4.10. ARTC will calculate the total unders or overs amount as part of its submission to the ACCC (section 4.10(a)(ii)). The amount may need to be adjusted in accordance with a determination by the ACCC.
(b) For each Constrained Coal Customer, ARTC will:
(i) establish a Constrained Coal Customer Account;
(ii) determine the annual allocation of the total unders or overs amount to each Constrained Coal Customer in accordance with the methodology specified at (iii);
(iii) determine an allocation of the total unders or overs amount, for each Constrained Coal Customer based on the proportion of Access revenue, paid for Access Rights over the Constrained Network, by each Constrained Coal Customer, net of any rebate of the take or pay component of the Charges paid to that Constrained Coal Customer following the application of the system true-up tests and the annual individual reconciliation, and where applicable, in accordance with the equitable allocation to be carried out under section 10.2;
(iv) add or subtract the annual allocation for the calendar year from the opening balance in each applicable Constrained Coal Customer Account in determining the closing balance of the applicable Constrained Coal Customer Account for that calendar year;
(v) advise each Constrained Coal Customer of the details of its Constrained Coal Customer Account; and
(vi) reconcile the Constrained Coal Customer Accounts by one of two methods, being:
(B) mutual agreement between the parties, which must result in an outcome that is equitable for all Constrained Coal Customers.
(c) For clarity, any refund provided to a Constrained Coal Customer under section 4.9(b)(vi)(A) will not exceed the total Access Charge payments (excluding including any Innovation Payment and Efficiency Incentive Amount) made by the Constrained Coal Customer in excess of Direct Costs in a calendar year.
(c) [Drafting note: it is not accepted that an Innovation Payment should still be payable in circumstances where due to other ARTC caused issues, a rebate is payable under the TUT]
(d) If ARTC voluntarily waives TOP Charges for an Access Holder that are otherwise contractually payable those waived TOP Charges are recoverable through increased TOP Charges applied to other Access Holders, or through unders and overs accounting under this section 4.9, or through a combination of both, except where the waiver is for the sole benefit of the Access Holder whose TOP Charges have been waived.
(e) A waiver of TOP Charges by ARTC under clause 11 of the Indicative Access Holder Agreement that would result in the use of a Service by that Access Holder which provides for more efficient use of Capacity or Coal Chain Capacity will, for the purposes of subsection (d), be deemed to:
(i) have benefits that are not solely for the Access Holder whose TOP Charges have been waived; and
(ii) be recoverable through increased TOP Charges applied to other Access Holders, or through unders and overs accounting under this section 4.9, or through a combination of both.
(f) To avoid doubt, any variation to TOP Charges paid during a calendar year resulting from complying with section 4 of the Undertaking, and specifically through complying with the applicable Ceiling Limit and calculation of any allocation of the total unders and overs amount, will not constitute a voluntary waiver of TOP Charges for the purpose of subsections (d) and (e).
4.10 Annual ACCC compliance assessment
(a) ARTC will submit to the ACCC by 30 April each year in respect of the previous calendar year, and for the part-year in which the Commencement Date occurs, the Months of the calendar year governed by the Undertaking:
(i) documentation detailing roll-forward of the RAB and the RAB Floor Limit, and comparisons between RAB and RAB Floor Limit;
(iii) where documentation in (i) above demonstrates that RAB is above RAB Floor Limit in Pricing Zone 3, documentation demonstrating that Standard Access Charges satisfy the requirements in section 4.3(b);
(iv) a forecast of Efficient operating expenditure for the calendar year immediately following the year to which the compliance assessment relates;
(v) sufficient documentation so that the ACCC can assess the costs and operating expenditure on an Efficient basis, in accordance with section 4.5(b), including (without limitation):
(A) if operating expenditure was higher than the forecast for the calendar year provided under the last Annual ACCC compliance assessment – reasons for any departure from that forecast;.
(B) any endorsement by the RCG of operating expenditure; and
(C) any other information which the ACCC has requested from ARTC in writing in order for the ACCC to assess the Efficiency of costs and operating expenditure; and
(iii)(vi) separately identify any costs associated with an Innovation Project, and evidence that no such costs are included in the roll forward of the RAB (including in any operating expenditure).
(b) The documentation submitted by ARTC to the ACCC will, unless otherwise agreed with the ACCC and having regard to the relevant circumstances applicable at the time, meet the information provision guidelines and the timeframes set out in Schedule H.
(c) If the ACCC reasonably considers that it requires additional information, other than that provided by ARTC in accordance with Schedule H, in order to carry out its assessment under section 4.10(d), it may request this information from ARTC in accordance with section 3 of Schedule H and upon receipt of such a request ARTC will use reasonable endeavours to provide the information to the ACCC as soon as reasonably practicable.
(d) The ACCC will determine whether ARTC has undertaken:
(i) roll-forward of the RAB and RAB Floor Limit in accordance with the Undertaking and, where the roll forward is not in accordance with the Undertaking, determine what closing RAB or RAB Floor Limit would be in accordance with the Undertaking;
(ii) when required, the calculations relevant to reconciliation of Access revenue with the applicable Ceiling Limit and calculation of any allocation of the total unders and overs amount in accordance with the Undertaking, and where the
calculations are not in accordance with the Undertaking, determine what total unders and overs amount or allocation would be in accordance with the Undertaking having regard to the operation of its unders and overs account;
(e) In determining whether ARTC has complied with the provisions of section 4.4 in rolling forward the RAB or the RAB Floor Limit, the ACCC may have regard to the submissions of relevant industry participants but if Capital Expenditure has been endorsed by the RCG in accordance with section 9, the ACCC will not consider whether that Capital Expenditure is Prudent.
(f) The ACCC will publish its findings on its website and/or circulate to Access Holders in relation to the matters for its determination.
(g) ARTC will revise the closing RAB and manage Constrained Coal Customer Accounts in accordance with any determination by the ACCC.
(h) The ACCC will determine whether ARTC has incurred Efficient costs and Efficient operating expenditure in accordance with section 4.5(b), and determine the change (if any) to:
(i) the total unders and overs amount or allocation; and
(ii) closing RAB in section 4.5(a),
that results from Economic Cost under section 4.5(a) only including Efficient costs and Efficient operating expenditure determined in accordance with section 4.5(b), but subject to the operation of the Operational Efficiency Incentive Scheme under section 9.3.
4.11 Annual TUT Audit
(a) At least three months prior to the end of a previous calendar year, ARTC will:
(i) advise the ACCC in writing of the identity of the person that it proposes to appoint as the auditor (“Proposed Auditor”) to audit ARTC’s compliance with its obligations under Schedule 2 of Access Holder Agreements in relation to the performance of the system true-up test in each Pricing Zone in that calendar year (“TUT Audit”); and
(ii) provide such information or documents that the ACCC requires to assess the skill and independence of the Proposed Auditor, and the proposed terms of engagement and confidentiality arrangements.
(i) is a current employee or officer of ARTC or its Related Bodies Corporate;
(ii) has been an employee or officer of ARTC or its Related Bodies Corporate in the past 3 years;
(iii) in the opinion of the ACCC, holds an interest in ARTC or its Related Bodies Corporate;
(iv) has within the past 3 years been a professional adviser to ARTC or its Related Bodies Corporate;
(v) has a contractual relationship, or is an employee of a firm or company that has a contractual relationship, with ARTC or its Related Bodies Corporate.
(c) If, within 5 Business Days of receipt by the ACCC of the information or documents from ARTC referred to in section 4.11(a), or such further period as required by the ACCC and notified to ARTC:
(i) the ACCC does not object to the Proposed Auditor, ARTC will appoint the Proposed Auditor as auditor to conduct the TUT Audit (“Auditor”) as soon as practicable on terms approved by the ACCC; or
(ii) the ACCC does object to the Proposed Auditor, ARTC will as soon as practicable appoint a person identified by the ACCC as the Auditor on terms approved by the ACCC,
and forward to the ACCC a copy of the executed terms of engagement of the Auditor.
(d) Following the appointment of the Auditor in accordance with section 4.11(c), ARTC will instruct the Auditor to conduct the TUT Audit as soon as practicable in accordance with the approved terms referred to in section 4.11(c).
(e) Subject to the Auditor continuing to meet the requirements in section 4.11(b) for the period of appointment, ARTC may appoint the Auditor to conduct the TUT Audit for consecutive calendar years.
(f) A person who is, or who has been, appointed as Auditor is eligible for re-appointment as Auditor, and will not be taken to fail the independence requirement on the sole basis that the person was previously appointed as Auditor under this section 4.10.
(g) ARTC will maintain and fund the Auditor and will indemnify the Auditor for reasonable expenses and any loss, claim or damage arising from the performance by the Auditor of functions required to be performed in conducting the TUT Audit, except where such expenses, loss, claim or damage arises out of the negligence, fraud, misconduct or breach of duty by the Auditor.
(h) The actual costs reasonably incurred in connection with the conduct of the TUT Audit (which will include those costs referred to in section 4.11(g)) will be included in the Economic Costs.
(i) ARTC will provide to the Auditor any information or documents requested by the Auditor that the Auditor reasonably considers necessary and relevant for conducting the TUT Audit.
(j) Not later than 30 April of the following calendar year, ARTC will provide the final written report of the TUT, as prepared by the Auditor (“Final Audit Report”), to the ACCC to review as part of the annual compliance assessment process under this Undertaking.
(k) The ACCC will review the Final Audit Report and will decide, and will notify ARTC of, any amounts of underpayment of rebates that are owing to Access Holders or amounts of overpayment of rebates ARTC is entitled to recover.
(l) If, at any time after receiving the Final Audit Report, the ACCC considers that a reconciliation between ARTC and Access Holders in respect of the incorrect calculation of rebates under the system true-up test under Schedule 2 of Access Holder Agreements will not materially affect the unders and overs accounting, then the ACCC will decide the amounts to be made or recovered by ARTC.
(m) Within 15 Business Days of receiving notification from the ACCC under section 4.11(k), ARTC will inform the individual Access Holders of any amounts of underpayment of rebates owing to them or amounts of overpayment of rebates they are required to remit to ARTC as determined by the ACCC in accordance with clause 2.8 of Schedule 2 of the Access Holder Agreements.
(n) Within 15 Business Days of giving that notice, ARTC will make payments of the amounts owing as advised under section 4.11(m) to individual Access Holders and is entitled to recover from Access Holders any amounts owing to it in accordance with clause 2.8 of Schedule 2 of the Access Holder Agreements.
4.12 Structure of Charges - Coal Access Rights
For Coal Access Rights:
(a) Charges may be on the basis of a combination of:
(i) actual usage (being a function of distance and gross mass ($/gtkm) for a Pricing Zone); and
(ii) a take or pay component ($/KM for a Pricing Zone) for the Access Rights contracted for under the Access Holder Agreement irrespective of whether the Access Holder uses all or any of the Access Rights.
(b) Notwithstanding a commitment by the Access Holder to pay the take or pay component of the Charge for Access Rights contracted for under the Access Holder Agreement, the Access Holder may be entitled to a rebate of the take or pay component of the Charges paid
following the application of Pricing Zone-wide true-up tests and an annual individual reconciliation.
4.13 Structure of Charges - Non-Coal Access Rights
For Non-Coal Access Rights:
(a) Charges will comprise:
(i) a variable component, which is a function of distance and gross mass ($/gtkm);
(ii) a flagfall component, which is fixed and specific to each Train service type and Segment ($/KM); and
(iii) an excess network occupancy component, which is a function of time ($/hr or part thereof) sought by an Applicant for a Train Path on the Network, which is in excess of:
(A) a reasonable allowance for section run times for the applicable Train service type as determined by ARTC;
(B) dwells for crossing and passing other Trains as determined and made available by ARTC for the Train Path; and
(C) an allowance for the reasonable requirements for operational activities whilst the Train occupies the Network as prescribed in sub-section (c),
for a Pricing Zone.
(b) The Charges for Non-Coal Access Rights will be set so that the Access revenue received by ARTC from an Access Holder of Non- Coal Access Rights in respect of a single journey between a Network entry point and a Network exit point, taking into account each component of a Charge outlined above, will be no greater than the average Access revenue received by ARTC for Coal Access Rights to complete the same journey, adjusted to reflect the relative difference in Capacity consumed by the Non-Coal Access Rights when compared to the Coal Access Rights.
(c) Allowances for the reasonable requirements for operational activities whilst the Train occupies the Network for a Pricing Zone are:
Pricing Zone | Allowance for reasonable requirements for operational activities (hr) |
Pricing Zone 1 | 0 |
Pricing Zone 2 | 0 |
Pricing Zone 3 | 0.16 |
(d) Subject to sub-section (e), the application of the excess network occupancy component relates only to the contracted Train Path, and not the utilisation of the Train Path.
(e) In determining the excess network occupancy component, ARTC will pro-rate the flagfall component back to an amount per hour by reference to the total of section run times applicable to the relevant Segment to which the flagfall component applies.
(f) Except as otherwise provided in the Access Agreement, the flagfall component and excess network occupancy component of the Charges, as applicable, are levied from the date ARTC grants access to the Train Path to the Access Holder until the expiry of that Train Path irrespective of whether such Train Path is utilised.
(g) The excess network occupancy component will only apply where the Applicant seeks to contract a Train Path on the Network, which is in excess of:
(i) a reasonable allowance for section run times for the applicable Train service type as determined by ARTC;
(ii) dwells for crossing and passing other Trains as determined and made available by ARTC for the Train Path; and
(iii) an allowance for the reasonable requirements for operational activities whilst the Train occupies the Network as prescribed in sub-section (c).
(h) In relation to utilisation of a contracted Train Path, the excess network occupancy component will not be charged in instances where ARTC is not able to provide the contracted Train Path or an agreed substitute Train Path except where the failure to provide the contracted Train Path is a result of an Incident, Third Party Works or an emergency.
(i) Notwithstanding the structure described above, all elements of the Charge are open to negotiation.
4.14 Pricing Objectives
(a) In determining Charges, ARTC will have regard to separate cost elements as follows:
(i) variable component of costs being Direct Costs; and
(ii) fixed component of costs being fixed operating costs and Depreciation of, and return on, assets.
(b) In determining Charges, ARTC will have regard to the following objectives:
(i) promoting the economically efficient operation, use of, and investment in, the Network;
(i)(ii) achieving the opportunity for full recovery of the Direct Costs from all Access Holders on the basis of actual network usage;
(ii)(iii) achieving maximum recovery of (or contribution to) Efficient fixed operating and capital related costs;
(iii)(iv) providing certainty to ARTC through the application of a take or pay (“TOP”) component to fully recover fixed operating and capital related costs;
(iv)(v) the proportion of fixed operating and capital related costs recovered through a TOP component to be consistently applied to all Access Holders holding Coal Access Rights within a Pricing Zone; and
(v)(vi) provide for an open and equitable mechanism for the application of TOP Charges.
4.15 Standard Access Charge
(a) ARTC will determine for each year the Standard Access Charges for Coal Access Rights with the characteristics within the Services Envelope for each Pricing Zone set out in section 4.15(c).
(b) Services with characteristics within the Services Envelope and Standard Access Charges apply to all Segments within a Pricing Zone.
(c) Once Standard Access Charges for all Services with characteristics within the Services Envelope are finalised each calendar year in accordance with section 4.18, ARTC will publish Standard Access Charges on its website in the following format:
Note: These Charges are exclusive of GST.
Segments | Non-TOP $/kgtkm (ex GST) | TOP $/KM (ex GST) | Service Envelope characteristics |
In Pricing Zone 1* | 0.963 | 58.907 | Maximum length 1,568 metres Maximum axle load 30 tonnes Maximum speed empty 80 kmh Maximum speed loaded 60 kmh Sectional running times (must meet) - As published on ARTC website from time to time. |
In Pricing Zone 2* | 0.999 | 49.482 | Maximum length 1,568 metres Maximum axle load 30 tonnes Maximum speed empty 80 kmh Maximum speed loaded 60 kmh Sectional running times (must meet) - As published on ARTC website from time to time. |
In Pricing Zone 3* | 2.482 | 85.244 | Maximum length 1,329 metres Maximum axle load 30 tonnes Maximum speed empty 80 kmh Maximum speed loaded 60 kmh Sectional running times (must meet) - As published on ARTC |
Segments | Non-TOP $/kgtkm (ex GST) | TOP $/KM (ex GST) | Service Envelope characteristics |
website from time to time. |
*Pricing Zones contain Segments as specified at Schedule E as at the Commencement Date
(d) ARTC will offer the applicable Standard Access Charges described in section 4.15(c) above to Applicants seeking Coal Access Rights with Service characteristics within the Services Envelope.
4.16 Charge differentiation
(ii) have regard to a range of factors which impact on its business including:
(A) the Standard Access Charges for Services within the Services Envelope;
(B) the particular characteristics of the relevant Service intended to utilise the Access Rights sought, which include axle load, speed, wheel diameter, Train length, origin and destination (including number and length of intermediate stops), departure and arrival times and days of the week;
(C) the commercial impact on ARTC’s business which includes:
(I) the term of the Access Holder Agreement;
(II) the consumption of ARTC’s resources;
(III) the Segments of the Network relevant to the Access Rights sought;
(IV) previously negotiated Charges agreed under the terms of the Undertaking, where relevant, as published by ARTC under section 2.7(b);
(D) logistical impacts on ARTC’s business which include:
(I) the impact on other Services and risk of failure of the endorsed Operator to perform its
obligations under the Operator Sub-Agreement; and
(E) Capital Contributions or other contributions by the Applicant to ARTC’s costs; and
(F) the cost of any Additional Capacity.
(b) In formulating Charges for Coal Access Rights, notwithstanding that a Service may be within or outside of the Services Envelope, if:
(i) the relevant Service intended to utilise the Access Rights sought operates on the Network and an Other Network; and
(ii) the Other Network is not capable of operating Services that have a maximum axle load or train length that is specified by the Services Envelope;
ARTC may have regard to the particular characteristics of the Other Network required to utilise the Access Rights sought and the characteristics of Services capable of being operated on the Other Network.
(i) previously negotiated Charges agreed under the terms of the Access Undertaking, where relevant, as published by ARTC under section 2.7(b);
(ii) the particular characteristics of the relevant Service intended to utilise the Access Rights sought, which include axle load, speed, wheel diameter, Train length, origin and destination (including number and length of intermediate stops), departure and arrival times and days of the week;
(iii) the commercial impact on ARTC’s business which includes:
(A) the term of the Access Agreement;
(B) the potential for growth of the business;
(C) the opportunity costs to ARTC;
(D) the consumption of ARTC’s resources, including Capacity;
(E) the credit risk associated with the business;
(F) the market value of the Train Path sought;
(G) the Segments of the Network relevant to the Access Rights sought;
(I) Capital Contributions or other contributions by the Applicant to ARTC’s costs; and
(J) the cost of any Additional Capacity.
[Drafting Note: the HRATF considers that the above factors, and the approach to determining the structure of charges as between coal and non- coal users is something that would need to be better and more clearly defined in the event of privatisation.]
(J)
(d) For the purposes of section 4.16(a)(i), section 4.16(a)(ii)(D)(II)4.16(a)(ii)(D)(ab), section 4.16(c)(iii)(D) and (H) above, ARTC will have regard to the optimal use of the Network for Services within the Services Envelope with the objective of optimising Coal Chain Capacity. As such, ARTC will determine the Capacity and Coal Chain Capacity consumption associated with the utilisation of Coal Access Rights for Services outside of the Services Envelope having regard to the Capacity and Coal Chain Capacity consumption of Services within the Services Envelope.
(e) If an Access Holder disagrees with a Charge formulated by ARTC, other than a Standard Access Charge , then the Access Holder may give ARTC a Dispute Notice within twenty (20) Business Days of being notified of the Charge and the dispute will be resolved by arbitration in accordance with section 3.15(f) of the Undertaking (if an Access Holder disagrees with a Standard Access Charge then the Access Holder must give ARTC a Dispute Notice in accordance with the requirements in section 4.18(f).
If the Dispute Notice given under section 4.16(e) concerns Coal Access Rights in a Pricing Zone and ARTC receives Dispute Notices from Access Holders holding two thirds or more of the Contracted Coal KM for Services within the Services Envelope in that Pricing Zone in accordance with the requirements in section 4.18(f), then a dispute notified under section 4.16(e) will be stayed pending the arbitrator’s determination of the dispute notified under section 4.18(f).
4.17 Limits on Charge differentiation
(a) Subject to sections 4.16(a), 4.16(c) and 4.16(d) above (as applicable), and to ARTC having an obligation under clause 3.8 of the Indicative Access Holder Agreement, ARTC will not, in formulating its Charges, have regard to:
(i) the identity of the Applicant; and
(ii) whether or not the Applicant is a Government Authority.
(b) Subject to sections 4.16(a), 4.16(c) and 4.16(d) above (as applicable), in formulating its Charges, ARTC will not differentiate between Applicants:
(i) in circumstances where:
(A) the characteristics of the Access Rights sought are alike;
(B) the Applicants are operating within the same end market; and
(ii) for Coal Access Rights, on the basis of the marginal cost of production of the mines being served by the Coal Access Rights sought, to the extent such information is known to ARTC.
(c) ARTC will determine whether the characteristics of Access Rights are alike having regard to matters including location, duration and quality of the Train Path, nature of Train consist, characteristics of the Service intended to use the Access Rights sought, longevity of Access Rights, arrival and departure times of the day and week.
4.18 Process for finalising Standard Access Charges
[Drafting note: the modified approach to ‘path based’ pricing is not one on which HRATF members have a common position. Coal producers will respond separately to the ACCC on this issue.]
(a) Before 1 July of each year ARTC may seek from each Access Holder, to the extent necessary, any proposed variations to the Access Holder’s Contracted Coal KM and tonnage requirement for the following calendar year and each of the next 9 calendar years including any proposed reduction in the Access Holder’s Contracted Coal KM to be relinquished and recontracted (Relinquished Capacity) in accordance with the principles set out in section 4.19 and 4.20.
(b) Each calendar year, ARTC will determine its annual forecast of costs for the Network in each Pricing Zone which are to be recovered by ARTC in the next calendar year.
(c) The Standard Access Charges will be based on the Contracted Coal KM for that calendar year, any additional KMs that ARTC considers likely to be Contracted Coal KM for that relevant year taking into account any Relinquished Capacity ARTC considers likely to be recontracted, and ARTC’s forecast costs as determined under sub- section (b).
(d) Subject to sub-section (e), ARTC will notify by 30 September of each calendar year for the following calendar year:
(i) the aggregate coal volumes and KMs which will include reasonably expected volumes and Contracted Coal KM, ARTC’s annual forecast costs as determined under sub- section (b) to those Access Holder holding Coal Access Rights in each Pricing Zone; and
(ii) the Standard Access Charges to those Access Holders holding Coal Access Rights for Services within the Services Envelope; and
(f) If Access Holders holding two thirds or more of the Contracted Coal KM for all Services within the Services Envelope in the relevant Pricing Zone for the next calendar year give ARTC a Dispute Notice within twenty (20) Business Days of being notified of the Standard Access Charges setting out that they disagree with the Standard Access Charges for that Pricing Zone, then the dispute will be resolved by arbitration under section 3.15(f). If less than two thirds of those Access Holders give a Dispute Notice within the required time for a Pricing Zone, the Standard Access Charges as notified for that Pricing Zone are final and not subject to arbitration under section 3.15(f). Additional Capacity in the Pricing Zone which has been contracted on a conditional basis and which will not be commissioned in the next calendar year will not count towards the two thirds test.
(g) ARTC will promptly publish the final Standard Access Charges on its website in the format set out in section 4.14(c):
(i) if there is no arbitration - following the end of the twenty (20)
Business Day dispute period; or
(ii) if there is an arbitration - following the determination by the arbitrator.
4.19 Provision of forecast information, pricing and coal volumes
(a) In addition to the information provided to each Access Holder of Coal Access Rights under section 4.18(d), ARTC will provide to each Access Holder of Coal Access Rights before 30 September of each calendar year:
(i) ARTC’s forecast annual total operating expenditure for each of the next 10 calendar years;
(ii) ARTC’s forecast annual capital expenditure for each of the next 10 calendar years as set out in the most recent version of the Hunter Valley Corridor Capacity Strategy (including all RCG endorsed capital expenditure as provided for in that document); and
(iii) subject to section 4.18(e):
(A) the aggregate annual coal volumes contracted by Access Holders for each of the next 10 calendar years;
(B) the forecast range of Standard Access Charges for each of the 2 calendar years following the year for which Standard Access Charges are notified under section 4.18(d) provided in the format set out in Schedule F; and
(C) the minimum aggregate annual coal volumes for all Access Holders for each of the next 10 calendar years, which will be determined by identifying the shortest possible term applicable to each Access Holder Agreement, should the Access Holder exercise any rights of early termination under that agreement.
(b) The information provided by ARTC under this section:
(i) will include information for the calendar year for which Standard Access Charges are determined and information provided for under section 4.18(d)(iii); and
(ii) is a forecast only based on the information available to ARTC and ARTC’s reasonable expectation at the time the information is provided and is not binding on ARTC.
4.20 Facilitating assignments of Relinquished Capacity
(a) ARTC will use reasonable endeavours to facilitate the permanent assignment of Relinquished Capacity notified by Access Holders as part of the annual process for finalising Standard Access Charges under section 4.18 in accordance with the following principles:
(i) following receipt of volumes of Relinquished Capacity nominated by Access Holders under section 4.18, ARTC will undertake a process to notify all Access Holders and prospective Access Holders of the aggregate capacity sought to be Relinquished Capacity and requesting expressions of interest for that capacity within a specified time frame;
(ii) following the end of the expression of interest period, ARTC will facilitate initiation of negotiations for the assignment of Relinquished Capacity to any Access Holders or prospective Access Holders who have expressed interest in contracting that capacity;
(iii) ARTC will use reasonable endeavours to achieve a workable alignment between its processes for the allocation and contracting of notified Relinquished Capacity and any other similar processes undertaken by the Terminal Operators; and
(iv) Relinquished Capacity must be assigned or traded by an Access Holder to a third party in accordance with the assignment or trading provisions of that Access Agreement. A permanent assignment of Capacity is an independent arrangement between Access Holders facilitated by ARTC in
accordance with this section 4.20 and the terms of the relevant Access Agreements.
(b) To the extent an Access Holder that nominated Relinquished Capacity is unable to assign or trade that capacity to a third party, then that Access Holder remains liable to ARTC for the TOP Charges for any Relinquished Capacity in accordance with the terms of its Access Agreement. To avoid doubt, any Relinquished Capacity not assigned or traded will remain Contracted Coal KM.
5 CAPACITY MANAGEMENT
5.1 System Assumptions
(a) ARTC will participate in the development of System Assumptions via the HVCCC and will use reasonable endeavours to agree System Assumptions with the HVCCC, the Terminal Operators and other relevant service providers. To avoid doubt, if a System Assumption is based on a subset of assumptions (which at the Commencement Date includes the Relevant System Assumptions), then ARTC will also use reasonable endeavours to agree those assumptions.
(b) ARTC will base each Capacity Analysis carried out under section 5.2 on the Relevant System Assumptions and ARTC will reflect the elements (f) to (j) of the Relevant System Assumptions in the Access Holder Agreements.
(i) the assumption with which ARTC does not agree;
(ii) the grounds on which ARTC does not agree with that assumption, together with supporting documentation for those grounds in reasonable detail; and
(iii) the assumption which ARTC reasonably proposes should apply instead of the assumption referred to in section 5.1(c)(i) (and, if applicable, the Relevant System Assumptions on which that assumption should be based).
(i) ARTC’s proposed assumption is necessary for reasons of safe operation of the Network or to prevent an adverse impact on the condition of the Network; or
(ii) the HVCCC’s assumption would have an adverse commercial implication for ARTC (provided that ARTC may not rely on this paragraph (ii) to the extent that the adverse commercial implication for ARTC would arise under the operation of system true-up test under Schedule 2 of Access Holder Agreements entered into pursuant to the Undertaking),
then ARTC's notification under section 5.1(c) must state that this is the basis for the disagreement.
(e) Within twenty 20 Business Days of receipt of the notice referred to in section 5.1(c), the HVCCC may notify ARTC that it wishes to raise a dispute based on the reasoning provided by ARTC for not adopting the relevant assumption. The HVCCC is not permitted to raise a dispute if ARTC disagrees with an assumption on the basis of one of the grounds in section 5.1(d) but to avoid doubt, this does not prevent the HVCCC raising a dispute on whether ARTC has acted reasonably in relying on section 5.1(d).
(f) Within 10 Business Days of the HVCCC giving a dispute notice under section 5.1(e), senior representatives from ARTC and the HVCCC will meet and use reasonable endeavours, acting in good faith, to resolve the dispute by joint discussions. If the dispute is not resolved, either party may notify a dispute with the ACCC for determination by arbitration in accordance with section 3.15(f)(ii).
(g) Upon receiving dispute notice under section 5.1(f), the ACCC will determine whether the assumption referred to in section 5.1(c)(i) or the assumption referred to in section 5.1(c)(iii) is the more reasonable assumption taking into account:
(i) the context of the daily operations of the Hunter Valley Coal Chain at the time of the publication of the System Assumption Document (as applicable), including for the purposes of accurately determining Capacity; and
(ii) the interests of:
(A) Access Holders with Coal Access Rights for export coal;
(B) Access Holders with Coal Access Rights for domestic coal;
(C) other users of the Network; and
(D) ARTC,
including whether ARTC or the parties referred to in paragraphs (A) to (C) will be materially disadvantaged, including in the context of, and basis upon, which ARTC or the party entered into the Access Agreement or Access Holder Agreement and, where applicable, in applying assumptions in the system true-up test under Schedule 2 of the Access Holder Agreements which are different to those to which ARTC or the
party has previously agreed and relied upon in entering the Access Agreement or Access Holder Agreement, provided that, in considering whether ARTC or the parties referred to in paragraphs (A) to (C) are materially disadvantaged as a result of that difference, the ACCC must take account of the reasons for that difference at the applicable time.
(h) If the ACCC reasonably considers that it requires additional information from ARTC to make a determination under section 5.1(g), it may request that information from ARTC and, upon receipt of such a request, ARTC must use reasonable endeavours to provide that information to the ACCC as soon as reasonably practicable.
(i) Once the ACCC makes its determination under section 5.1(g) as to which assumption is the more reasonable assumption, that assumption will be regarded as a System Assumption or (where applicable) a Relevant System Assumption for the purposes of the Undertaking.
(j) Until such time as the ACCC makes its determination, all calculations, assessments and determinations made by ARTC on the basis of the then applicable System Assumptions will be made on the basis of the assumption referred to in section 5.1(c)(iii). If the determination of the ACCC is that the assumption referred to in section 5.1(c)(i) is to apply, that assumption will be regarded as a System Assumption or (where applicable) a Relevant System Assumption for the purposes of the Undertaking and ARTC will revise accordingly any calculations, amendments or determinations made on the basis of the assumption referred to in section 5.1(c)(i) in relation to the TOP rebates arising from the system true-up test under Schedule 2 of Access Holder Agreements to the extent necessary.
5.2 Capacity Analysis
(a) A Capacity Analysis will be undertaken by ARTC as part of the preparation of the Indicative Access Proposal. The Capacity Analysis will identify whether, indicatively, there is sufficient Available Capacity to meet the Applicant’s request for Access Rights and, if not, indicatively, the extent to which Additional Capacity is required.
(a)(b) In assessing whether there is Available Capacity to meet an Applicant’s request for Access Rights in accordance with section 5.2(a), ARTC must take into account whether Capacity could be made available to meet the request through an assignment of Relinquished Capacity under section 4.20.
(b)(c) Where ARTC believes that there are major impediments to the provision of Additional Capacity to meet an Applicant’s request, and that the Additional Capacity that might be necessary would have a significant bearing on the economics of the proposed operation, the Capacity Analysis may be done in more detail which may require more time for the preparation of the Indicative Access Proposal (section 3.10). Where a Capacity Analysis is to be done in more detail pursuant to this section, ARTC may charge a fee that is based on reasonable cost and agreed with the Applicant.
(c)(d) The finalisation of the Capacity Analysis will enable the finalisation of the resultant Capacity Entitlement, Train Paths, Charges and terms and conditions of the resultant Access Agreement.
(d)(e) As part of undertaking its Capacity Analysis, ARTC will consult the HVCCC and will take into account the HVCCC’s comments on the availability of Coal Chain Capacity, in accordance with the following steps:
(i) ARTC will seek the HVCCC’s views as to whether the provision of the Access Rights sought will have an impact on Coal Chain Capacity;
(ii) where the HVCCC provides its view within 20 Business Days, or such other time as agreed with ARTC, ARTC will consider the view expressed by the HVCCC in good faith;
(iii) where ARTC disagrees with the view expressed by the HVCCC, ARTC will provide the HVCCC (and if requested, the Applicant where that Applicant is not a member of the HVCCC) with written reasons, subject to confidentiality restrictions, why it disagrees with the HVCCC’s assessment within 10 Business Days of receipt of that assessment, or such other period as agreed with the HVCCC and will ask the HVCCC to consider ARTC’s reasons and provide its revised view within a specified timeframe;
(iv) where the HVCCC provides its view within the specified timeframe, ARTC will consider the revised view of the HVCCC in good faith.
(e)(f) While ARTC will have regard to the HVCCC’s views in accordance with section 5.2(d), ARTC will have the sole right to determine whether there is sufficient Available Capacity to grant the Access Rights sought by the Applicant.
5.3 Identification of Shortfall in existing Capacity
(a) If, at any time during a month, ARTC identifies that there is likely to be a shortfall in Capacity to meet all remaining unconditional Capacity entitlements held by all Access Holders in that month, after taking into account likely usage of Access Holders with an allocation period of a quarter, and the shortfall arises other than as a result of planned maintenance, (“Capacity Shortfall”) then ARTC will:
(i) as soon as reasonably practicable, inform each Access Holder (if affected), Terminal Operators and the HVCCC of the expected duration of the Capacity Shortfall but to avoid doubt, ARTC’s representation of the expected duration of the shortfall is not binding on ARTC; and
(ii) subject to ARTC meeting its obligations under section 5.4 and section 5.5, consult with the HVCCC in accordance with the principles in Schedule G with the objective of coordinating its response to the Capacity Shortfall with the other Hunter Valley Coal Chain Service Providers.
(b) For the purposes of this section 5, the Capacity entitlement held by an Access Holder will be considered an unconditional Capacity entitlement if all conditions precedent to the conferral of that Capacity entitlement on the access holder under the terms of the relevant access agreement, including the completion of designated projects, have been satisfied, or waived by ARTC.
5.4 Event leading to Capacity Shortfall of less than five days
(a) If ARTC expects that an event resulting in a Capacity Shortfall will be for a duration of five days or less and there will be insufficient Capacity to meet all remaining unconditional Capacity entitlements held by all Access Holders in that Month after taking into account likely usage of Access Holders with an allocation period of a quarter, ARTC will allocate the Capacity available in accordance with the following principles:
(i) Capacity will be allocated first to passenger services in accordance with ARTC’s obligations under section 88L of the Transport Administration Act 1988 (NSW);
(ii) Capacity remaining after the allocation of Capacity under sub- section (a)(i) will be allocated to Access Holders at ARTC’s discretion. In exercising its discretion, ARTC must take into account its contractual obligations under Access Agreements but may allocate Capacity other than on an equitable basis if
it is consistent with the objective of ensuring efficient utilisation of Capacity and Coal Chain Capacity during the Capacity Shortfall and after considering any recommendations provided by the HVCCC under section 5.3(a)(ii); and
(iii) In exercising its discretion under section 5.4(a)(ii), ARTC will use its best endeavours, to the extent practicable, not to reduce availability of contracted access rights from load points not affected by the Capacity Shortfall under this section 5.4.
(b) ARTC will promptly inform the HVCCC of the result of the allocation of Capacity under section 5.4(a).
5.5 Event leading to Capacity Shortfall greater than five days
(a) If ARTC expects that an event resulting in a Capacity Shortfall will be for a duration of more than five days or an event resulting in a Capacity Shortfall subsequently has a duration of more than five days, and there will be insufficient Capacity to meet all remaining unconditional Capacity entitlements held by all Access Holders in that month after taking into account likely usage of Access Holders with an allocation period of a quarter, ARTC will allocate the Capacity available in accordance with the following principles:
(i) Capacity will be allocated first to passenger services in accordance with ARTC’s obligations under section 88L of the Transport Administration Act 1988 (NSW);
(ii) To the extent practicable, contracted access rights from load points not affected by the Capacity Shortfall (for example, load
points east of the event causing the Capacity Shortfall), will not be reduced by the Capacity Shortfall and Access Holders should continue to be able to use Capacity entitlements originating from unaffected load points; and
(iii) ARTC will, to the extent practicable, reduce access rights for each affected load point (for example, a load point west of the event causing the Capacity Shortfall where the Access Holder has Capacity entitlements remaining in that month) with the objective that each affected load point will at the end of the month have borne an equitable pro-rata share of the Capacity Shortfall.
(b) ARTC will promptly inform the HVCCC of the result of the allocation of Capacity under section 5.5(a).
5.6 Shortfall in creation of Additional Capacity
(a) Where there is a delay in the completion of a project creating Additional Capacity such that some, but not all, Additional Capacity becomes available, or a project creating Additional Capacity creates less Capacity than expected, that Capacity will be allocated among the Access Holders who have Capacity Entitlements to the Additional Capacity on an equitable pro-rata basis. By way of example, if one Access Holder had 60% of all contracted Capacity Entitlements to the Additional Capacity created by that project, then 60% of the available Additional Capacity will be allocated to that Access Holder.
(b) ARTC will promptly inform the HVCCC of the result of the allocation of Capacity under section 5.6(a).
5.7 Capacity resumption, relinquishment and transfer
(a) The terms of the Access Agreement will provide that ARTC may reduce the Capacity Entitlement of an Access Holder where an Access Holder has under-utilised the Capacity Entitlement granted to it under that Access Agreement. Any decision by ARTC in this regard is subject to the dispute resolution provision in the Access Agreement.
(b) An Access Holder may also reduce its Capacity Entitlement in accordance with the terms of the Access Agreement.
(c) A Capacity Entitlement may be assigned or traded by an Access Holder to a third party in accordance with the assignment or trading provisions of that Access Agreement.
6 NETWORK CONNECTIONS
(a) In the event that other owners of track not part of the Network wish to connect such track to the Network, ARTC will consent to such a connection provided:
(i) all relevant approvals from all relevant Government Authorities have been obtained;
(ii) the configuration of the connection to the Network is such that the connection will not, by virtue of its existence, reduce Capacity or Coal Chain Capacity (in assessing Coal Chain Capacity, ARTC will consult the HVCCC, and take into account HVCCC’s comments on any reduction of Coal Chain Capacity in accordance with the steps set out in section 5.2(d) and (e), as applicable);
(iii) procedural and physical interface arrangements comply with ARTC’s existing interface arrangements and there is no impact on safety;
(iv) the owners of track not part of the Network ensure that all users of such track comply with the directions of ARTC’s Network controllers regarding entry to and exit from the Network;
(v) the connection meets ARTC’s engineering and operational standards;
(vi) the owners of track not part of the Network meet the initial and continued costs associated with constructing and maintaining the connection and agree to reasonable terms associated with the construction, maintenance and operation of the connection as determined by ARTC; and
(vii) the connection is not inconsistent with the terms of any lease, licence or other arrangement to which ARTC is a party in respect of the land on which the connection is to be built. Subject to any confidentiality restrictions or obligations, ARTC will make available extracts of the relevant terms on request.
(b) For the purposes of section 6, connection includes the Turnout and, if the construction of railway track on land owned or controlled by ARTC forming part of the Hunter Valley Network corridor is necessary to connect the Turnout to the owner’s track, the portion of railway track on ARTC owned or controlled land forming part of the Hunter Valley Network corridor necessary to connect the Turnout to the other owner’s track.
(c) Unless otherwise agreed, ARTC will generally lease the assets relating to the connection from the owner for