Scottish Power Plc, R (on the application of) v The Director General Of Electricity Supply

In regulating a licence-holder, a statutory electricity regulator must consider the overall effect of a proposed licence modification on prices, competition and the finance of the separate licensed businesses. That duty permits consideration of related price-control components, but it does not justify refusing a modification merely because another licence-holder received an offsetting reduction elsewhere. The regulator must consider whether an accompanying adjustment is needed, or whether the matter should be referred to the Monopolies and Mergers Commission. A prior agreement to licence changes is only weakly relevant where it cannot determine the proper statutory method of price control. Where the court quashes an irrational decision but more than one lawful course remains open, it should remit the matter rather than order a particular modification.

Scottish Power Plc sought judicial review of the Director General’s refusal to modify its electricity supply licence after the Monopolies and Mergers Commission recommended changing the Great Britain Yardstick definition in Scottish Hydro-Electric Plc’s licence. Scottish Power had accepted earlier modifications under the Electricity Act 1989, while the other licence had been referred to the Commission and subsequently modified. Ognall J dismissed the application on 31 July 1996, finding no irrationality and treating the 1998 issue as peripheral. The appeal concerned whether the different treatment of the two licences was rational and lawful, and whether the Commission’s public-interest finding required immediate effect.

1. Disposition. The appeal was allowed. The decision in the Director’s letter of 14 September 1995 was quashed by certiorari. The matter was remitted to the Director for reconsideration in accordance with the Court’s findings, including consideration of whether to make a further reference to the Monopolies and Mergers Commission. No specific licence modification was ordered. Such an order would be appropriate only if the court was satisfied that only one lawful decision could reasonably be made.
2. Statutory approach. Under the Electricity Act 1989, the Director’s duties included promoting competition, protecting consumers as to prices and securing sufficient revenue for the proper conduct of licensed businesses. He was entitled, and required, to consider the whole price-control structure rather than automatically transfer the modified Great Britain Yardstick definition from one licence to another.
3. Invalid distinction. Once the Director had applied the Commission’s modified definition to the other Scottish company, the reasons given for refusing the same treatment to Scottish Power provided no valid basis for the distinction. The offsetting reduction in the other company’s distribution revenue did not justify refusal. The Director could assess whether Scottish Power required an accompanying adjustment to another component, or refer the matter to the Commission. The possibility that the Commission might have reached a different conclusion for Scottish Power was not a sufficient reason for refusing to reconsider the licence.
4. Subsidiary issues. Scottish Power’s prior consent to the earlier modifications had no significant force in determining the proper definition of the price-control term. The cross-subsidy argument provided no separate ground. The 1998 issue also provided no separate ground; the Commission’s report could have been clearer, although it appeared to contemplate that the necessary change would be made at once.

• Court of Appeal (Civil Division) Appeal allowed; Ognall J’s orders set aside; certiorari granted to quash the Director’s decision; matter remitted for reconsideration. [1997] EWCA Civ 911
• High Court of Justice, Queen’s Bench Division Ognall J dismissed the judicial review application on 31 July 1996.