UK Power Networks (Operations) Ltd, R (on the application of) The Gas and Electricity Markets Authority & Ors

Sections 19 and 20 of the Electricity Act 1989 do not prohibit an electricity distributor from requiring payment of connection costs in advance, whether in full or by stages. The statutory language is broad and permits the timing of payment and the financing consequences to be assessed as part of what is reasonable. Section 20 gives an additional power to require security for payment, including security for contingent expenses; it does not convert every advance payment into security or make interest payable on every advance payment. Regulatory control under sections 21 and 23 protects customers against unreasonable terms.

Willmott Dixon Construction Ltd required electricity connection works from UK Power Networks (Operations) Ltd, acting for a licensed distribution network operator. UK Power Networks required the connection costs to be paid in advance. After the works were completed, Willmott Dixon claimed interest under section 20 of the Electricity Act 1989.

The Gas and Electricity Markets Authority determined that advance payment was lawful only as security under section 20, with interest consequently payable. UK Power Networks brought judicial review proceedings, challenging that construction of sections 19 and 20. The central issue was whether the Act prohibited advance payment of connection costs except where taken as security.

1. The claim succeeded. GEMA’s decision was quashed.
2. Sections 16A, 19, 20, 21 and 23 of the Electricity Act 1989 form a broadly expressed and regulated scheme. The distributor must state the payment, security and other terms required, and those terms remain subject to reasonableness review by GEMA.
3. Section 19 contains no express prohibition on advance payment. Although “expenses reasonably incurred” may at first suggest costs already incurred, the statutory language can also encompass costs that will be or are likely to be incurred. The timing of payment may be relevant to whether the amount required is reasonable, including financing costs, inflation and other commercial risks.
4. The 2015 Regulations supported the claimant’s construction because they contemplated payment before completion of works or a phase of works, separately from security. They were not decisive, particularly because delegated legislation cannot determine the meaning of the Act and GEMA had changed its position.
5. Section 20 gives an additional power to require security for payment under section 19. Its purpose is not defeated if ordinary advance payments fall under section 19. Security may cover contingencies, such as possible removal costs, which may never be incurred. Interest is payable where money is deposited as security, but that does not make every advance payment a security deposit.
6. GEMA’s construction would introduce unnecessary rigidity and create difficulties for commonplace staged works. Advance payment without interest may be lawful where its financial advantages and disadvantages are reflected in the price or other terms, subject to regulatory review for reasonableness.

First-instance judicial review proceedings. No earlier appellate decision is stated in the judgment.