R UK Power Networks (Operations) Ltd v The Gas and Electricity Markets Authority Willmott Dixon Construction Ltd (Interested Party) Scottish Hydro Electric Power Distribution Plc and Another (Interveners)

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
JudgeThe Honourable Mr Justice Ouseley,Mr Justice Ouseley
Judgment Date23 May 2017
Neutral Citation[2017] EWHC 1175 (Admin)
Docket NumberCase No: CO/5102/2016

[2017] EWHC 1175 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Ouseley

Case No: CO/5102/2016

Between:
The Queen on the application of UK Power Networks (Operations) Limited
Claimant
and
The Gas and Electricity Markets Authority
Defendant

and

Willmott Dixon Construction Limited
Interested Party

and

(1) Scottish Hydro Electric Power Distribution Plc
(2) Southern Electric Power Distribution Plc
Interveners

Richard Gordon QC & Gerard Rothschild (instructed by the Company Solicitor, UK Power Networks) for the Claimant

Javan Herberg QC & Tom Coates (instructed by Ofgem) for the Defendant

Michael Fordham QC and Naina Patel (instructed by Addleshaw Goddard) for the Interveners

Hearing dates: 9 & 10 May 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Honourable Mr Justice Ouseley Mr Justice Ouseley
1

Willmott Dixon Construction Ltd, the Interested Party, applied to UK Power Networks (Operations) Ltd, UKPN, the Claimant, for electricity connection works at the Tesco site in Woolwich. UKPN acts on behalf of London Power Networks plc, LPN, another company in the UK Power Networks group of companies. LPN is a licensed electricity distribution network operator, DNO. The Electricity Act 1989 enables a customer who wants electricity connection works to require the DNO to offer to carry them out.

2

UKPN issued the connection offer letter but required Willmott Dixon to pay the costs of the connection works in advance of the commencement of works. Willmott Dixon did so, paying £1,478,965 plus VAT, in three instalments, the largest of which, £1,271,656 plus VAT was paid in August 2011. After completion of the works, Willmott Dixon complained to UKPN that it ought to have paid interest on the three advance payments, by virtue of s20 of the Electricity Act 1989. UKPN disagreed, though accepting in a letter of 17 July 2014 that it ought to have asked for staged payments, that is payments in advance of the commencement of each stage of works. On that basis, it sent Willmott Dixon a cheque for £21,852 interest.

3

Willmott Dixon pursued the issue, referring the dispute to the Defendant Regulator, the Gas and Electricity Markets Authority, GEMA, in August 2014. After a process involving a provisional decision and further submissions, GEMA issued its decision on 26 July 2016. It concluded that, because those payments had been made in advance, interest on them was payable. Advance payments could only be taken by way of security, upon which interest was required to be paid. This decision depended on an issue of statutory construction of ss 19 and 20 of the Act and not, at least not directly, on a regulatory judgment about a fair balance between customer and electricity distributor. UKPN challenges that decision as based on an error of statutory construction.

4

GEMA also determined the minimum interest that it would have approved for UKPN to pay Willmott Dixon. That part of its decision is not challenged, but it is not without relevance to the issue of statutory construction.

The statutory provisions

5

The Electricity Act 1989, which deals with the privatised electricity distribution and supply industry, contains provisions which, so far as material, had no counterparts in earlier electricity supply legislation. There have been changes to the 1989 Act over time, parts of which have been referred to as an aid to construction, and more recent immaterial changes.

6

The principal objective of GEMA is "to protect the interests of existing and future consumers" in relation to the supply of electricity; s3A. A distributor of electricity is under a "duty – (a) to make a connection between a distribution system of his and any premises, when required to do so by – (i) the owner or occupier of the premises…for the purpose of enabling electricity to be conveyed…". This includes the provision of electric lines and plant; s16(1).

7

S16 and the next group of sections deals with how that "duty" "when required" is undertaken. S16 continues:

"(3) The duties under this section shall be performed subject to such terms as may be agreed under section 16A for so long as the connection is required.

(4) In this section and sections 16A to 23—

(a) any reference to making a connection includes a reference to maintaining the connection (and continuing to provide the necessary electric lines or electrical plant);

(b) any reference to requiring a connection includes a reference to requiring the connection to be maintained (and the continued provision of the necessary electric lines and electrical plant);

(5) The duties under this section are subject to the following provisions of this Part and any regulations made under those provisions."

8

S16A deals with procedure. By subsection (1) the person requiring the connection "in pursuance of s16(1) shall give the distributor a notice requiring him to offer terms for making the connection." The notice must specify the premises to be connected, the date by which the connection is required and the maximum power level, and such other information as the distributor reasonably requests. Although there is provision in subsection (4A) for regulations to be made entitling the distributor to require payment of "connection offer expenses", no such regulations have been made. Connection offer expenses are however routinely required to be paid and are paid.

9

Subsection (5) provides for the next step by the distributor:

"(5) As soon as practicable after receiving the notice under subsection (1) any information requested under subsection (3) and any amount payable by virtue of subsection (4A) to the distributor by the person requiring the connection, the distributor shall give to that person

a notice –

(a) stating the extent (if any) to which his proposals are acceptable to the distributor and specifying any counter proposals made by him;

(b) specifying any payment which that person will be required to make under section 19(1) or regulations under section 19(2);

(c) specifying any security which that person will be required to give under section 20; and

(d) stating any other terms which that person will be required to accept under section 21."

10

Section 19(1) is one of two sections at the heart of the issue. It provides:

"Where any electric line or electrical plant is provided by an electricity distributor in pursuance of section 16(1) above, the distributor may require any expenses reasonably incurred in providing it to be defrayed by the person requiring the connection to such extent as is reasonable in all the circumstances."

11

Much of the debate related to whether the words "reasonably incurred" meant "have been" incurred as GEMA contended, or "have been or will be" incurred, as UKPN contended, and even "are likely to be incurred", or "may be incurred". In furtherance of the arguments, other parts of s19 and other sections were prayed in aid to understanding the Parliamentary draughtsman's use of tense with passive voice. At the relevant time subsection (2) permits the making of regulations to cover the position where an initial contributor "has made a payment" to the distributor in respect of the provision of an electric line or plant, and "the line or plant having been provided" another person requires connection to that line. Subsection (4) was much debated because it does refer to payment for works yet to be undertaken; it reads:

"Any reference in this section to any expenses reasonably incurred in providing an electric line or electrical plant includes a reference to the capitalised value of any expenses likely to be so incurred in continuing to provide it."

12

S20 is the other section at the heart of the issue. It provides:

"(1) Subject to the following provisions of this section, an electricity distributor may require any person who requires a connection in pursuance of section 16(1) to give him reasonable security for the payment to him under section 19 in respect of the provision of any electric line or electrical plant."

(1A) If a person fails to give any security required under subsection (1), or the security given has become invalid or insufficient, and he fails to provide alternative or additional security, the electricity distributor may if he thinks fit—

(a) if the connection has not been made, refuse to provide the line or plant for so long as the failure continues; or

(b) if the connection is being maintained, disconnect the premises or distribution system in question.

(3) Where any money is deposited with an electricity distributor by way of security in pursuance of this section, the distributor shall pay interest, at such rate as may from time to time be fixed by the distributor with the approval of the Authority, on every sum of 50p so deposited for every three months during which it remains in the hands of the distributor."

13

Mr Herberg points to the language of s20 (1) which ties the taking of security to "payment under section 19". It cannot be taken for sums which do not come within s19. The consequences of that are not entirely straightforward when it comes to contingencies. He submitted for example that, were a distributor to be concerned lest the customer become insolvent while the works were underway, it could proceed by way of taking a security for sums yet to be incurred, just as if it wanted advance payment simply for its advantage in financing the cost of the works.

14

Section 21 deals with the terms which the distributor can require the person who requested the connection to accept:

"An electricity distributor may require any person who requires a connection in pursuance of section 16(1)...

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