Peak Gen Top Co Ltd & Ors, R (on the application of) v The Gas And Electricity Markets Authority & Anor

An expert regulator’s disagreement with a claimant’s assessment of complex technical evidence does not establish a failure to consider material considerations. The decision-maker determines the manner and intensity of the inquiry required, subject to rationality review.

The EU principle of non-discrimination requires comparable situations to be treated alike and different situations differently, unless objectively justified. The inquiry is not necessarily rigidly divided between comparability and justification. Relevant differences in market function, remuneration, regulatory treatment and network connection may justify different treatment.

Eight electricity generators and suppliers sought judicial review of Ofgem’s decision approving changes to electricity transmission charging arrangements for embedded generators. The changes removed the previous treatment of certain small embedded generators’ output as negative demand for calculating transmission residual charges and replaced associated payments with an Embedded Export Tariff.

The claim alleged breach of the EU principle of non-discrimination and failure to take account of material considerations, particularly the alleged long-term transmission-network savings caused by small embedded generation. The claim was opposed by Ofgem and SSE.

1. The claim was dismissed. The court treated Ofgem as an expert regulator making a decision on complex technical matters. The court would be slow to interfere with its assessment, particularly where irrationality was not challenged.
2. Ofgem had considered whether small embedded generators produced long-term avoided transmission-network costs beyond the avoided costs reflected in the Embedded Export Tariff. It had considered the submissions, reports and evidence, and had concluded that only avoided GSP infrastructure costs were robustly demonstrated. The claimants’ disagreement with that conclusion was an argument about weight and merits, not a failure to take account of a material consideration.
3. The decision-maker is responsible for determining the manner and intensity of an inquiry into a material consideration: R. (Khatun) v Newham LBC [2005] QB 37. Ofgem had invited further evidence through its consultation process and had considered the material supplied. No legal duty required it to conduct the further investigations proposed by the claimants.
4. The EU principle of non-discrimination requires comparable situations not to be treated differently, or different situations to be treated alike, without objective justification: R. (on the application of RWE Generation UK Plc) v Gas and Electricity Markets Authority [2015] EWHC 2164 (Admin). The comparability and justification stages are useful analytical tools but may overlap: R. (on the application of Rotherham MBC) v Secretary of State for Business, Innovation and Skills [2015] UKSC 6.
5. Small embedded generators were materially different from providers of behind-the-meter generation and commercial demand-side response. The latter reduced customers’ gross demand and contracted directly with customers; small embedded generators supplied electricity to suppliers and, in some cases, received payments which Ofgem considered distorted the market.
6. Small embedded generators were also materially different from transmission-connected generators. The groups differed in transmission charges, connection arrangements and the treatment of avoided GSP costs. The fact that embedded generators paid deeper connection charges did not make the Decision discriminatory, particularly because that issue was not the purpose of the previous payments and could be considered in the Targeted Charging Review.
7. The court did not need to resolve the wider questions concerning deference to the expert regulator or whether non-discrimination could require continuation of an unjustified benefit.