Npower Direct Ltd, Npower Ltd, Npower Northern Ltd, Npower Northern Supply Ltd, Npower Yorkshire Ltd, Npower Yorkshire Supply Ltd v The Gas and Electricity Markets Authority

Hearing dates: 28 th and 29 th November 2018

Approved Judgment

Introduction

There are before the Court two applications, namely

(1) an application made on 2 October 2018 pursuant to s. 27(1) Electricity Act 1989 (“ EA89”) and s. 30(1) Gas Act 1986 (“ GA86”) to quash a Provisional Order (“ PO”) made by the Defendant (“ Ofgem”) on 24 September 2018 to secure compliance with the Claimants' licence condition 32A by virtue of their failure to comply with §14 of a direction of which the Claimants (“npower”) were given notice on 1 August 2018 pursuant to that condition, and which took effect on 31 August 2018 (“ the Direction”) (CO/3876/2018) ( “the PO claim”);

(2) a claim for judicial review seeking to challenge the lawfulness of that Direction (CO/4329/2018). This claim was issued on 31 October 2018, with the Statement of Facts and Grounds (“SFG”) being filed and served on 5 November 2018 (“ the Judicial Review Claim”).

These two claims have been joined and expedited, with the latter being listed for a rolled-up hearing. Ofgem has filed Acknowledgement of Services, Summary Grounds of Defence and evidence in respect of both.

The case has become dogged down in procedural issues which took a large part of the time of the two-day hearing. They are capable of obscuring the true nature of the dispute, which is in essence a complaint by a supplier of electricity and gas relating to a requirement that it complies with requirements relating to the circulation to its customers of information designed to make them consider the terms provided to them by npower and to consider alternative terms or sources of supply.

In this judgment, I shall deal with the nature of the controversy. I shall then consider the applications and the issues which arise in that connection. If this case had not been a rolled-up hearing, it is possible that there would have been preliminary points which would have arisen (e.g. if the Judicial Review Claim was out of time or if the statutory review proceedings were appropriate among others). Since all matters have been rolled up, it is more appropriate for me to look at the controversy first before addressing specifically the applications and the procedural and substantive matters.

The parties

Npower (which is referred to in the plural because it is a compendious term for the Claimants comprising various npower companies) are licensed suppliers of gas and electricity to homes and businesses in Great Britain. They are commonly referred to collectively or individually “npower”. Usually, I shall refer to them as “npower”. They have been referred to as one of the “big six” who comprise a large part of the market and in respect of whom Ofgem consulted for its trial referred to below. As with other suppliers of gas and electricity, npower hold licences granted under the EA89 and the GA86. Those licences in turn require compliance with “ Standard Licence Conditions” (“ SLCs”) of which there are numerous set out in about 500 pages. This case concerns SLC 32A which is described below.

Ofgem is a body established under the Utilities Act 2000 and it acts on behalf of the Gas and Electricity Markets Authority. It is also the designated “National Regulatory Authority” for Great Britain under the latest EU internal market Directives, namely Directive 2009/72/EC concerning common rules for the internal market in electricity (“ the Electricity Directive”) and Directive 2009/73/EC concerning common rules for the internal market in gas (“ the Gas Directive”) (together “ the EU Directives”). The UK so designated Ofgem by the Electricity and Gas (Internal Markets) Regulations 2011/2704, adding s.3A to the Utilities Act 2000 “Designation of Authority as regulatory Authority for Great Britain.

There is before the Court an intervening party, namely the Competition and Markets Authority (“the CMA”). Permission has been granted in the course of the hearing for it to intervene in these applications. According to its website, it is an independent non-ministerial department which works “ to promote competition for the benefit of consumers, both within and outside the UK.” Its aim is said to be “ to make markets work well for consumers, businesses and the economy.”

The legislative framework

The Electricity Directive provides at Article 37(16–17) (and the equivalent provision in the Gas Directive is at Article 41(16–17):

“ 16. Decisions taken by regulatory authorities shall be fully reasoned and justified to allow for judicial review. The decisions shall be available to the public while preserving the confidentiality of commercially sensitive information.

17. Member States shall ensure that suitable mechanisms exist at national level under which a party affected by a decision of a regulatory authority has a right of appeal to a body independent of the parties involved and of any government.”

Ofgem is responsible for the economic regulation of the electricity and gas industries in Great Britain. By section 3A(1) of the EA89 (and see s.4AA(1), (1B) GA86), Ofgem has as its principal objective in exercising its functions under that Act “ to protect the interests of existing and future consumers in relation to electricity conveyed by distribution systems or transmission systems.” It must do so “ in the manner which the … Authority … considers is best calculated to further the principal objective, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity ….” (s.3A(1A)) (emphasis added).

By s.3A(5A), Ofgem must “have regard”, in carrying out its functions under Part 1 of the EA89 (corresponding to s.4AA(5A) GA86), to—

“(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed; and

(b) any other principles appearing to [it] to represent the best regulatory practice.” (emphasis added)

Power to impose, and enforce, licence conditions

Npower require a licence from Ofgem in order to supply electricity and gas to premises (otherwise they would be committing a criminal offence: e.g. s.4 EA89): see s.6 EA89 and s.7A GA86. Ofgem has a discretion to include such conditions as appear to it to be requisite or expedient having regard to its above duties: see s.7 EA89 and s.7B GA86.

In particular, by s.7(3)(a) EA89, conditions included in a licence may require the licence holder to comply with any direction given by Ofgem as to such matters as are specified in the licence or are of a description so specified (see also s.7B(5)(a)(i) GA86).

By s.11A and 11B EA89 and s.23B GA86, Ofgem has the power to make modifications to the conditions of a particular licence and/or to the standard conditions imposed on any licence, subject to a duty to give notice of any such modifications and to invite and consider representations on such modifications before making them.

As indicated, the case concerns the application of Standard Licence Condition 32A (“ SLC 32A”) on npower pursuant to these powers on 30 January 2017, which provides:

“32A.1 For any purposes connected with the Authority's consideration of measures or behaviours which may impact on consumer engagement (‘consumer engagement measures’), the licensee must comply with a direction issued by the Authority in respect of Relevant Matters for Standard Condition 32A

32A.2 The licensee is not required to comply with a direction issued pursuant to 32A.1 unless the Authority has given the licensee at least 1 month's prior Notice.

32A.3 A direction issued under paragraph 32A.1 may include a requirement to comply with any instructions from the Authority or a third party agent appointed by the Authority for the purposes of conducting any test of consumer engagement measures.”

Ofgem has a duty under s.25 EA89 and s.28 GA86 to secure compliance with conditions by way of a final order or a provisional order (i.e. a PO). By s.25 EA89 (equivalent to s.28 GA86), as far as relevant here:

(1) Subject to subsections (2), (4A) to (5A) and section 26 below, where the Authority is satisfied that a regulated person is contravening, or is likely to contravene any relevant condition or requirement, it shall by a final order make such provision as is requisite for the purpose of securing compliance with that condition or requirement.

(2) Subject to subsections (4A) to (5A) below, where it appears to the Authority –

a. that a regulated person is contravening, or is likely to contravene, any relevant condition or requirement; and

b. that it is requisite that a provisional order be made,

it shall (instead of taking steps towards the making of a final order) by a provisional order make such provision as appears to him requisite for the purpose of securing compliance with that condition or requirement.

(3) In determining for the purposes of subsection (2)(b) above whether it is requisite that a provisional order be made, the Authority shall have...