Daniel Farmiloe v Gas and Electricity Markets Authority
[2024] EWHC 2584 (Admin)
E.ON Next Energy Limited, R (on the application of) v The Gas and Electricity Markets Authority
17 November 2023
[2023] EWHC 2891 (Admin)
High Court
A company (E.ON) that helped customers of failed energy companies was refused payment for extra costs. The regulator (Ofgem) said the rules were fair, but the court agreed with E.ON on one point: Ofgem shouldn't have taken away an extra £15 million because of a conditional offer. The case shows how difficult it is to make rules about unpredictable events in the energy business.
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 The subsequent Deed superseded any potential legitimate expectation.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.
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