Michael's decision has left a wave of confusion among the interested parties but is sure to fill the lawyers' pockets even further as Epic chief executive David Williams insisted the price ruling made the pipeline's sales contract null and void.

Williams stated that the transport price granted by the regulator was lower than that contained in the 1998 contract between Epic and the government, and therefore Epic no longer believes it was legally obliged to honour the other commitments of the $2.4 billion acquisition.

Ken Michael said Epic's purchase of the pipeline was not affected by any representations by the government as to the tariffs that may apply.

"In balancing those interests, I have decided that the price that Epic Energy paid for the pipeline was not based upon a sound commercial assessment and the consequences of this for the financial viability of Epic Energy have less weight in balancing Epic Energy's legitimate business interests against the interests of users and the public interest in having competition in markets and in a supply of competitively priced gas."

Michael estimated that the average 100% load factor tariff would be $0.95/GJ as at 1 January 2000 and $1.01/GJ as at 1 January 2003.

This is an estimate that leaves Epic in a financial quandary. David Williams said, "The regulator's stated tariffs highlight a shortfall from the $1.00/$1.08/GJ tariffs sought by Epic Energy under our proposed Access Arrangement.

"We do not understand how the regulator calculated these tariffs. He has not given us explanations as to how he derived his 'average' tariff nor has he provided us with his model or access to his model so that we can replicate his figures. It will be a number of days before we can determine the true effect of his decision on tariffs and the operation of the DBNGP. As a result we do not know the impact on our financial viability."

The initial contract required Epic to undertake a substantial expansion of the line, which is operating at full capacity, and that it charge future users the same transport price as existing customers. However, Williams said the tariff decision meant Epic was no longer committed to the expansion, which could cost close to $870 million, and would not have to apply a uniform tariff.

"The commitment that Epic gave as part of the final bid that became part of the asset sale agreement no longer applies."

Williams said Epic will look into the ramifications of the decision further before making any solid commitment for or against the expansion.

Commenting on the issue, the Australian Council for Infrastructure Development was reported to have labeled the regulatory process an "ill-humoured farce."

Council chief, Dennis O'Neill, said the release provided neither clarity nor certainty for investors, instead it provided "a convincing argument for price deregulation of transmission pipelines."

The OFFgar will soon see how good its legal advice has been.