R Homesun Holdings Ltd, Friends of the Earth Ltd and Solar Century Holdings Ltd v Secretary of State for Energy and Climate Change
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MITTING |
| Judgment Date | 21 December 2011 |
| Neutral Citation | [2011] EWHC 3575 (Admin) |
| Date | 21 December 2011 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CO/11055/10734/11091/2011 |
[2011] EWHC 3575 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Mitting
CO/11055/10734/11091/2011
Mr S Grodzinski QC (instructed by Asserson Law Offices) appeared on behalf of HomeSun Holdings Limited
Mr N Pleming QC and Mr D Sinclair (instructed by ? ) appeared on behalf of Friends of the Earth Limited
Mr E Robb (instructed by Prospect Law) appeared on behalf of Solar Century Holdings Limited
Me P Nicholls and Mr J Cornwell (instructed by treasury Solicitors) appeared on behalf of the Defendant
By the Electricity Act 1989, Parliament broke up state controlled monopolies by which electricity was supplied to UK consumers and substituted a regulated market with separate and, in significant respects, competing participants. Electricity used to be generated and transmitted across the National Grid by the Central Electricity Generating Board and supplied to end users by 12 regional boards. After the Act came into force the electricity industry was divided into four components: generation, transmission, distribution and supply. The Act has been amended over the years, principally by the Public Utilities Act 2000.
The present structure of the industry allows for competition between generators and suppliers to ends users, down to individual households. Transmission and distribution are, and remain, regulated natural monopolies albeit now privately owned. The market is regulated by the Gas and Electricity Markets Authority and its executive arm, Ofgem ("Ofgem"), but the Secretary of State for Energy and Climate Change also has a role to play. The generation, transmission, distribution and supply of electricity without a licence is an offence under section 4. Ofgem is responsible for granting licences under section 6 and for setting and subsequently modifying their standard terms under sections 8A and 11A.
The principal objective of Ofgem and the Secretary of State is to protect the interests of consumers by promoting effective competition (section 3A(1)). The Secretary of State is from time to time required to issue guidance to Ofgem about the contribution by Ofgem to the attainment of social and environmental policies, to which Ofgem must have regard. (Section 3B(1) and (2)).
The Energy Act 2008 introduced a politically determined alteration to the regulated market to encourage the installation and use of low-carbon technology in the generation of electricity. Sections 41 to 43 contained enabling provisions to encourage the installation and use of small-scale generators by a variety of low-carbon energy sources and technologies. One of them is solar photovoltaics: using the power of the sun to generate electricity by solar panels, typically installed on the roofs of buildings.
This case concerns solar panels with a generating capacity of no more than 4 kilowatt hours, which I will refer to as "small solar systems".
Sections 41 to 43 relevantly provide:
"41. Power to amend licence conditions etc: feed-in tariffs
(1) The Secretary of State may modify …
(b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act~…
(2) The Secretary of State may exercise the power in subsection (1) for the purpose only of—
(a) establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage small-scale low-carbon generation of electricity~…
(3) Modifications made by virtue of subsection (1) may include—
(a)provision requiring the holder of a supply licence to make a payment to a small-scale low-carbon generator, or to the Authority for onward payment to such a generator, in specified circumstances;
(b)provision specifying how a payment under paragraph (a) is to be calculated;
(c)provision for the level of payment under paragraph (a) to decrease year by year in accordance with a formula published, or to be published, by the Secretary of State;
(d)provision about the circumstances in which no payment, or a reduced payment, may be made to a small-scale low-carbon generator …
(4) In this section—…
'small-scale low-carbon generation' means the use, for the generation of electricity, of any plant—
(a) which, in generating electricity, relies wholly or mainly on a source of energy or a technology mentioned in subsection (5), and
(b) the capacity of which to generate electricity does not exceed the specified maximum capacity.
'small-scale low-carbon generator' means an owner of plant used or intended to be used for small-scale low-carbon generation, whether or not the person is also operating or intending to operate the plant …
(5) The sources of energy and technologies are—…
(d) photovoltaics …
(6) The Secretary of State may by order modify the list of sources of energy and technologies for the time being listed in subsection (5) …
42. Power to amend licence conditions etc: procedure.
(1) Before making a modification, the Secretary of State must consult—
(a)the holder of any licence being modified.
(b)the Gas and Electricity Markets Authority, and
(c)such other persons as the Secretary of State considers appropriate.
(2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.
(3) Before making modifications, the Secretary of State must lay a draft of the modifications before Parliament."
There then follows a provision which mimics the negative resolution procedure set out in the Statutory Instruments Act 1946, which requires 40 days to be allowed to Parliament to disapprove the modification proposed.
"(5) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft.
43. Feed-in tariffs: supplemental
(1)A modification under section 41 of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989.
(2) Where the Secretary of State makes modifications under section 41(1)(b) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority ('the Authority') must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(3)The Secretary of State may by order—
(a)make provision conferring functions on the Authority or the Secretary of State (or both) in connection with the administration of any scheme established by virtue of section 41 …"
Sections 104 and 106 provide for the making of orders as envisaged in section 43(3)(a) and for what is meant by "modify" when modifications are made otherwise than by order, the procedure set out in section 42:
"'modify' includes amend, add to, revoke or repeal."
With effect from 1 April 2010 the Secretary of State introduced a scheme to encourage the installation of, amongst other technologies, generators with a maximum capacity of 5 megawatts, including small solar systems. The means were to require licensed electricity suppliers —amongst whom feature most prominently the so-called "big 6" —to pay a sum of money per kilowatt hour for electricity generated by small solar systems to their owner, whether or not the owner consumed the electricity or supplied it back to the National Grid. The owner can be, but need not be, the owner of the building to which the solar panel is fixed. One of the claimants in these proceedings is a so-called "aggregator" which owns a large number of small solar systems, for which it receives the feed-in tariffs but from which it permits the homeowner to draw free electricity.
The scheme was established and carried into effect by a combination of the Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 and by amendments to the standard licence conditions issued to electricity suppliers. Both contain complex and extensive definition provisions, which I propose to summarise and incorporate in my description of the scheme.
Article 4 requires Ofgem to accredit eligible installations, including small solar systems, on a central feed-in tariff register if it is satisfied that they fulfill the requirements of Article 5, that is to say that their generating capacity is less than 50 kilowatt hours, that they use appropriate technology and that they are submitted for accreditation by a licensed electricity supplier. Ofgem is required to assign a tariff code to the accredited installation by reference to its description in a schedule to the standard licence condition and the feed-in tariff year, which runs from 1 April to 31 March, in which it became eligible for accreditation.
That date is described in Schedule A to the standard licence conditions as:
"… the later of the date:
(a) …
(ii) of receipt by [an electricity supplier] of [an owner's] request for … Registration …
(b) on which the Eligible Installation is
Commissioned."
From then on, and for the next 25 years, the electricity supplier must pay to the owner of a small solar system installed in the years 1 April 2010 to 31 March 2011 and 1 April 2011 to 31 March 2012 either 36. 1 or 31.3 pence per kilowatt hour depending on whether it was fitted to a new or existing building. Clause 3.3 of Part 1 of Schedule A to the standard licence...
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