The Gas and Electricity Markets Authority v Infinis Plc & Infinis (Re-Gen) Ltd The Non-Fossil Purchasing Agency Ltd (Interested Party)

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
JudgeMR JUSTICE LINDBLOM
Judgment Date10 August 2011
Neutral Citation[2011] EWHC 1873 (Admin)
Date10 August 2011
Docket NumberCase No: CO/7013/2010

[2011] EWHC 1873 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Lindblom

Case No: CO/7013/2010

Between:

The Queen on the application of

(1) Infinis Plc
(2) Infinis (Re-Gen) Limited
Claimants
and
The Gas and Electricity Markets Authority
Defendant
and
The Non-Fossil Purchasing Agency Limited
Interested Party

Mr Michael Fordham QC and Tristan Jones (instructed by Wragge & Co) for the Claimants

Mr Thomas Sharpe QC and Michael d'Arcy (instructed by Michael Knight) for the Defendant

Hearing dates: 14 and 15 July 2011

MR JUSTICE LINDBLOM

Introduction

1

Was it lawful for the defendant, the Gas and Electricity Markets Authority ("the Authority"), to decide, as it did on 30 March 2010, to refuse accreditation under article 21 of the Renewables Obligation Order 2009 (SI 2009/785) ("the 2009 Order") and article 6(3) and (4) of the Renewables Obligation Order 2006 (SI 2006/1004) ("the 2006 Order") for the Welbeck and Candles generating stations owned and operated respectively by the first claimant, Infinis Plc, and the second claimant, Infinis (Re-Gen) Limited? That is the main issue in this claim for judicial review. It turns on whether, for each site, there was at the relevant time an arrangement – known under article 21 of the 2009 Order as an "NFFO arrangement", and under article 6(3) and (4) of the 2006 Order as an "extant qualifying arrangement" – providing for the building of a generating station which had not yet been commissioned at the time of the Authority's decision. If such arrangements did exist, the Candles and Welbeck stations were "excluded" generating stations, no Renewables Obligation Certificate ("ROC") could be issued for the electricity generated at them, and the Authority could not grant accreditation for them.

2

Put shortly, the rival contentions are these. The claimants argue that, in the case of either site, the Replacement Power Purchase Agreement ("RPPA") entered into between its predecessors in title and the interested party, the Non-Fossil Purchasing Agency Limited ("the NFPA") on 8 March 2001 had become "of no force and effect" by the time the Authority made its decision, and that no "NFFO arrangement" then subsisted. The Authority argues that each RPPA was, and continued to be, an "NFFO arrangement" under the 2009 Order. It is common ground that the RPPAs, while they had "force and effect", would have been "NFFO arrangements", having been entered into under the provisions of the Electricity (Non-Fossil Fuel Sources) (England and Wales) Order 1998 ("NFFO Order 5"); that, on 31 December 2008, apart from certain saved provisions, both RPPAs lapsed in accordance with their own terms; that, unless article 21 of the 2009 Order and article 6(3) and (4) of the 2006 Order applied after that date, the claimants were entitled in law to be accredited for the issuing of ROCs; and that such accreditation would be effective for Candles from the date of the application (28 January 2009) and for Welbeck from the date on which the station became operational (24 March 2009).

3

The claim was heard on 14 and 15 July 2011. On 25 July 2011 I indicated my decision to uphold the claim and to order relief. I now give my reasons for that decision.

Background

The legislative history

4

At least since the coming into force of the Electricity Act 1989 ("the 1989 Act") domestic legislation has promoted the generation of electricity from renewable sources. Under the 1989 Act and statutory instruments made under it, public electricity suppliers were required to enter into arrangements to secure electricity from non-fossil fuel sources. The Order relevant to this claim is NFFO Order 5. The statutory scheme was changed by the Utilities Act 2000 ("the 2000 Act") and subsequent statutory instruments. Under the new scheme, the general rule is that generating stations are awarded ROCs for generating electricity from renewable sources. Designated electricity suppliers are required to provide ROCs to the Authority, demonstrating that renewable electricity has been provided to customers. If they do not provide sufficient ROCs, they must pay a charge, known as the "Buyout Payment". The relevant statutory instrument in force for the period 1 April 2007 to 31 March 2009 was the 2006 Order. The statutory instrument in force from 1 April 2009 is the 2009 Order. In the shift from mandatory supply arrangements (under the1989 Act) to a scheme which envisaged the acquisition of ROCs from generators (under the 2000 Act), the arrangements made under the old NFFO Orders were capable of continued effect in modified form. The NFPA was required to enter into arrangements with generators which would replace the arrangements entered into under the NFFO Orders. The RPPAs with which this case is concerned were made with the NFPA as such replacement arrangements. Because the claimants' applications for accreditation related to the periods both before and after 1 April 2009, they fell to be determined under both the 2006 Order and the 2009 Order. It is common ground that the effect of the exclusion provisions in the two Orders, though differently expressed, is the same.

The original arrangements for Welbeck and Candles

5

Welbeck and Candles are generating stations fuelled by landfill gas.

6

In September 1998 the then owners of Welbeck and Candles entered into arrangements with public electricity suppliers under the NFFO regime, pursuant to NFFO Order 5.

The new arrangements

7

Under the Electricity from Non-Fossil Fuel Sources Saving Arrangements Order 2000 (SI 2000/2727) ("the NFFO Saving Order 2000"), the benefit of the arrangements was transferred from the old public electricity suppliers to the NFPA by the RPPAs, which are in materially the same terms. The recitals to the RPPAs make plain the essential purpose of their provisions. Paragraph (A) in the recitals refers to the "Original NFFO Contract" in either case, "pursuant to which, with effect from the Commissioning of the Facility, the Buyer agreed to purchase the electricity generated by the Facility up to the Relevant Metered Output".

8

The claimants acquired Welbeck and Candles in 2007. They became the "Seller" under the RPPAs. The NFPA was the "Buyer".

9

As was required under the NFFO regime, the RPPAs secured that specified amounts of electricity were to be available to the "Buyer". Clauses 3.1 and 3.2 provided:

" 3.1 Entitlement to Contracted Capacity

The Seller confirms that it will be the operator of the Facility and hereby grants to the Buyer the sole and exclusive right for the Contract Term to the Contracted Capacity.

3.2 Making the Contracted Capacity Available

Subject to the provisions of clause 3.4 [which related to Force Majeure], the Seller hereby undertakes to make the Contracted Capacity available for the Contract Term to the Buyer."

The "Contract Term" was defined in clause 1.1 as:

"the period form the Effective Date until the earliest to occur of:

(A) the expiration of the period specified in paragraph 6 of schedule 2 of the Original NFFO Contract [which was 15 years from the Effective Date];

(B) the expiration of the period specified in the Renewables NFFO5 Order in respect of electricity from generating stations in the same Technology Band as referred to in paragraph 7 of schedule 2 of the Original NFFO Contract [which was landfill gas]; and

(C) the date of termination of the Contract Term pursuant to clause 15."

10

Clause 3.3, under the heading "Prudent Operating Practice", stated:

"The Seller confirms that it will operate the Facility during the Contract Term in accordance with Prudent Operating Practice whilst using Reasonable Endeavours to ensure that:

(A) the Facility generates and delivers Energy to the Delivery Point in accordance with clause 5.1 whenever it is practicable that it should do so; and

(B) (without prejudice to its obligations in clause 4 and subject to clause 3.4) the Contracted Capacity is made available."

11

Clauses 11, 12 and 13 of the RPPAs provided respectively for charges, terms of payment and the application of relevant levy payments. Clause 11.1 provided:

" Price for Relevant Metered Output

There shall be due from the Buyer to the Seller in respect of each Contract Billing Period the Premium Price for each kWh of Relevant Metered Output which shall be payable in accordance with the provisions of clauses 12 and 13. The Buyer shall not have any obligation to purchase Additional Metered Output from the Seller and the Seller shall have no obligation to sell Additional Metered Output to the Buyer."

12

Under the heading "Installation of Facility" clause 3.5 of the RPPAs committed the Seller to using "Reasonable Endeavours" to install the "Facility", in these terms:

"The Seller undertakes to use Reasonable Endeavours to install the Facility in accordance with the particulars specified in schedule 2 of the Original NFFO Contract and as may otherwise be specified in the Seller's Information…"

"Reasonable Endeavours" were defined, in clause 1.1, as meaning

"…notwithstanding Force Majeure, the taking by the person subject to the obligation of all of the reasonable steps in accordance with Prudent Operating Practice which a prudent and conscientious person having willingly undertaken the obligation would take to achieve the object of the obligation".

Schedule 2, which was drawn from the NFFO contracts that were the precursors of the RPPAs, specified, in either case, the location of the generating station (in paragraph 1), the "Facility" which was to be installed (in paragraph 2) and the "Contracted Capacity" (in paragraph...

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