South of Scotland Electricity Board v British Oxygen Company Ltd (No 1)
| Jurisdiction | Scotland |
| Judgment Date | 07 November 1957 |
| Docket Number | No. 47.,No. 6. |
| Date | 07 November 1957 |
| Court | Court of Session (Inner House - Second Division) |
2ND DIVISION.
Lord Hill Watson.
StatuteConstructionElectricity supplyTariff fixed by Area BoardMeaning of "undue" preference or discriminationWhether Board bound to enter into agreement with consumer for supply of electricityElectricity Act, 1947 (10 and 11 Geo. VI, cap. 54), sec. 37 (7) and (8).
The Electricity Act, 1947, which places the supply of electricity under the control of a Central Authority and Area Boards, enacts, by sec. 37 (3), that "the prices to be charged by Area Boards for the supply of electricity by them shall be in accordance with such tariffs as may be fixed from time to time by them"; by sec. 37 (7), that, notwithstanding this, "an Area Board may enter into an agreement with any consumer for the supply of electricity to him on such terms as may be specified in the agreement in cases where the tariffs in force are not appropriate owing to special circumstances"; and, by sec. 37 (8), that an Area Board, in fixing tariffs and making agreements, "shall not show undue preference to any person or class of persons and shall not exercise any undue discrimination against any person or class of persons."
An Area Board fixed a tariff under which, when the price of coal was 38s. per ton, the charge per unit of electricity was 45d. for high-voltage supply and 475d. for low-voltage supply, representing a differential in unit charge in favour of high-voltage consumers of 555 per cent. The tariff contained a fuel variation clause which provided that the unit charge should be increased at a certain rate, which was the same for both high-voltage and low-voltage supply, as the price of coal increased. On two subsequent occasions the Board fixed new tariffs, in each of which the basic charge per unit of electricity was increased for both high-voltage and low-voltage supply. In an action by a company who were consumers of high-voltage electricity against the Board for reduction of all three tariffs, as being contrary to sec. 37 (8) of the 1947 Act and therefore illegal, parties were agreed that, as it cost more to produce low-voltage than high-voltage supply, high-voltage consumers were entitled to a preference over low-voltage consumers. The pursuers averred, however, with respect to the original tariff, that, by applying the same fuel variation charge to both high-voltage and low-voltage supplies, the defenders were exercising undue discrimination against high-voltage consumers; and, with respect to the subsequent tariffs, that, in fixing the new basic charges per unit, the defenders were exercising undue discrimination against high-voltage consumers, in respect that these charges were arrived at by taking the old unit charges for high-voltage and low-voltage supplies and making the same increase (based on the increased cost of coal) on both, whereby the original differential in favour of high-voltage consumers was substantially reduced. The pursuers averred that the least differential which could be given without undue discrimination against high-voltage consumers was 555 per cent when the price of coal was 38s. per ton, and that the differential should increase as the price of coal increased. The pursuers also sought declarator that under sec. 37 (7) the Board were bound to enter into an agreement with them for the supply of electricity to one of their works, to which, they averred, the tariffs were inappropriate on account of special circumstances.
Held (1) that the Board were under no obligation to enter into a special agreement with the pursuers under sec. 37 (7), which conferred no right on any consumer to be supplied under such an agreement, and that the pursuers' averments, so far as relating to that matter, were irrelevant; but (2) (rev. judgment of Lord Hill Watson) that it was not necessary, in order to state a relevant case under sec. 37 (8), to aver that in fixing a tariff the Board had been influenced by any oblique motive or had taken any illegitimate consideration into account, the question of what amounted to an undue preference or discrimination being one of degree, to be decided on a broad consideration of all the facts of the case; and a proof before answer allowed on the averments relating to the alleged breaches of sec. 37 (8).
Dictum of Sargant, J., in Attorney-General v. Long Eaton Urban District CouncilELR, [1914] 2 Ch. 251, at p. 263,discussed.
The British Oxygen Company, Limited, brought an action against (first) the South West Scotland Electricity Board and (second) the British Electricity Authority (who were called for any interest they might have), concluding, inter alia, (1) "For declarator (a) that the first-named defenders, in fixing their Industrial Maximum Demand Tariff intimated to the pursuers by letter dated 13th November 1951 for supplies of electricity for industrial purposes by the first-named defenders within the South West Scotland Area on and after 1st January 1952, exercised undue discrimination against industrial users of supplies of electricity metered at or above a voltage of 6000, including the pursuers, contrary to the provisions of the Electricity Act, 1947, section 37 (8), and (b) that the said Industrial Maximum Demand Tariff is illegal and ultra vires and of no force and effect." (2) "For production and reduction of the said Industrial Maximum Demand Tariff as applied to users metered at or above a voltage of 6000." (3), (4), (5) and (6) For similar declarators in regard to two subsequent tariffs, applicable after 1st October 1953 and 1st April 1954 respectively, and for their reduction. (7) "Separatim, for declarator (a) that the said Industrial Maximum Demand Tariff applicable on and after 1st January 1952 was, and the said Industrial Maximum Demand Tariff applicable on and after 1st October 1953 was, and the said Industrial Maximum Demand Tariff applicable on and after 1st April 1954 is not appropriate for the supply of electricity metered at or above a voltage of 6000 by the first-named defenders to the pursuers' works at Hillington, Glasgow, owing to special circumstances: (b) that the first-named defenders, by their refusal to enter into an agreement with the pursuers in terms of section 37 (7) of the Electricity Act, 1947, for the supply of electricity to the said works, are exercising undue discrimination against the pursuers, contrary to the provisions of section 37 (8) of the said Act: and (c) that the first-named defenders are bound to enter into an agreement with the pursuers under said section 37 (7) for the supply of electricity to the pursuers' said works."
The following narrative of the pursuers' averments in support of conclusions 1 to 6 is taken from the opinion of the Lord Ordinary (Hill Watson):"The Board issued an industrial tariff, commencing, as far as the pursuers were concerned, on 1st January 1952, No. 8 of process, in which supplies of electricity could be obtained either in accordance with the Industrial Block Tariff or the Industrial Maximum Demand Tariff. The present case is concerned with this latter tariff. Under this tariff the supply is metered either at or above a voltage of 6000 or at a voltage less than 6000, the former being the high-voltage supply and the latter the low-voltage supply. In each case the price per kilowatt at unity power factor is charged for the kilowatts of maximum demand in each month on a sliding scale, the charges which are made for high-voltage supply being less than the charges for low-voltage supply. In addition all units supplied in each month are charged at a price of 045d for high-voltage supply and 0475d for low-voltage supply. It is averred by the pursuers that the amount of fuel required to produce and supply to the user a given amount of electricity for a high-voltage supply is less than that required to produce and supply the same amount of electricity for a low-voltage supply, as the latter involves greater losses in transformation and distribution. This is admitted by the defenders and accordingly there is agreement that high-voltage consumers are entitled to a preference over low-voltage consumers. The tariff also contains a fuel variation clause in the following terms:The unit charge shall be increased or reduced at the rate of 00008d per unit for each penny by which the fuel cost per ton used for the purpose of, and shown on the invoice for, the supply of electricity in bulk by the British Electricity Authority to the Board in the previous month is more or less than 38s. The pursuers admit that the difference between the unit price of 045d for a high-voltage supply and 0475d for a low-voltage supply is a fair differentiation when the price of coal is 38s. per ton, the differential in unit charge being 555 per cent. They complain that the increase in the unit charge based upon the increased cost of coal, being the same for the users of high-voltage and low-voltage supplies, namely, 00008d per unit, operates unfairly against high-voltage consumers. They aver that this gives an undue preference to the consumers of low-voltage supplies. The increased cost of coal is a material element in the charge, since, according to the pursuers' averments, in the twelve months ended 31st March 1953 the average cost of fuel per ton was 67s. 3d. and approximately 38 per cent of the unit component (basic unit rate plus fuel addition) is attributable to the fuel variation charge. They accordingly aver that by applying the same fuel variation charge to both high-voltage and low-voltage consumers the first-named defenders have exercised undue discrimination against the pursuers and other high-voltage users within the area, contrary to the terms of section 37 (8) of the said Act.
"On 14th September 1953 the Board published a new and modified Industrial Maximum Demand Tariff, No. 26 of process, which came into operation on 1st October 1953. On 1st March 1954 the Board issued a further Industrial Maximum Demand Tariff, No. 17...
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British Oxygen Company v South West Scotland Electricity Board (No 2)
...not there had been such discrimination. (In the Court of Session 7th November 1957 and 28th March 1958—1958 S. C. 53. Also reported ante, 1955 S. C. 440, and 1956 S. C. (H. L..) 112.) The first appeal was against an interlocutor of the Second Division in an action for declarator and payment......