Key Facts
- •E.ON Next Energy Limited (E.ON) was appointed as a Supplier of Last Resort (SoLR) for Igloo, Symbio, and Enstroga after their failures in 2021.
- •E.ON claimed Last Resort Supply Payments (LRSPs) to recover costs associated with its SoLR role, including 'shaping/imbalance costs'.
- •Ofgem, the regulator, rejected E.ON's claims for shaping/imbalance costs, leading to judicial review.
- •E.ON argued that a 'Comfort Letter' from Ofgem created a legitimate expectation that these costs would be recoverable.
- •Ofgem argued that its decisions were rational and within its statutory discretion, referencing established criteria and the need to protect consumer interests.
- •E.ON also challenged Ofgem's deduction of £15 million based on E.ON's conditional offer to contribute to costs.
Legal Principles
Legitimate Expectation
R v IRC, ex parte MFK Underwriting [1990] 1 WLR 1545; Anand and another v Royal Borough of Kensington and Chelsea [2019] EWHC 2964 (Admin); R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] QB 1397
Irrationality/Wednesbury Unreasonableness
R v Director General of Telecommunications ex p Cellcom [1999] ECC 314
Interpretation of Commitments under Supply Licences
SLC 8.3
Implied Terms in Contractual Contexts
Braganza v BP Shipping Ltd [2015] 1 WLR 1661
Outcomes
E.ON's claim for legitimate expectation failed.
The Comfort Letter did not create a clear and unambiguous legitimate expectation regarding the recovery of shaping/imbalance costs. The subsequent Deed superseded any potential legitimate expectation.
E.ON's claim for irrationality failed.
Ofgem's decisions were a reasonable application of established criteria, within its broad statutory discretion and margin of appreciation. The criteria were not new, but applied consistently to a new context.
E.ON's alternative ground succeeded in part.
Ofgem wrongly deducted £15 million from E.ON's Igloo LRSP claim. E.ON's conditional contribution wasn't a legally binding commitment, as it was subject to E.ON's own discretion regarding fair treatment of its claim.