British Gas Trading Ltd, R (on the application of) v The Gas and Electricity Markets Authority & Ors

A public consultation must give consultees a fair opportunity to address the issue before the decision is made. That requires sufficient information, expressed clearly enough to enable an intelligent response. Where a regulator bases a material cost assessment on assumptions about typical behaviour, those assumptions must have a sound evidential foundation and be disclosed if consultees cannot otherwise test them. A decision may be unlawful where an objectively verifiable mistake of fact or unsupported assumption materially influences the reasoning. The appropriate remedy may be declaratory relief and reconsideration rather than quashing, particularly where the regulator has statutory power to adjust the decision.

The claimant challenged GEMA’s decision under the Domestic Gas and Electricity Tariff Cap Act 2018 fixing the wholesale energy cost allowance for the first domestic default tariff price-cap period. GEMA had changed the historical observation window used in its calculation after consulting suppliers. Its assessment that the revised allowance would sufficiently cover an efficient supplier’s costs relied on an undisclosed continuity assumption: that a typical large supplier had broadly maintained an 18-month hedging strategy until the May 2018 consultation.

British Gas contended that the assumption was factually wrong, material, and not fairly disclosed during consultation. The central issues were whether the consultation was procedurally fair, whether GEMA had acted on a material mistake of fact, and what relief should follow.

1. Claim succeeded. The court granted declaratory relief. The price-cap decision was not quashed. GEMA was required to reconsider the Q1 2019 allowance in light of the information now available and make any appropriate adjustment.
2. Under the Domestic Gas and Electricity Tariff Cap Act 2018, GEMA had to balance the statutory needs in section 1(6), including protecting default-tariff customers and ensuring that efficiently operated suppliers could finance licensed activities. The Act permitted one cap applicable to all suppliers, so differences in suppliers’ actual costs did not by themselves invalidate the approach.
3. The consultation duty under section 2(3) was not confined to the broad methodology. It extended to key ingredients and material assumptions in the chosen approach. A fair consultation had to give consultees sufficient information, in sufficiently clear terms, to make an intelligent response. The continuity assumption was material to GEMA’s assessment of whether the revised observation window would cover a typical supplier’s costs, but it was not disclosed until the final decision.
4. The assumption was also factually unsound. Evidence showed that most of the major suppliers had materially changed their hedging strategies before May 2018 in response to market developments and the proposed price cap. The generalised model therefore did not fairly represent a typical large supplier and could not provide a sound basis for the sufficiency assessment.
5. The court accepted that the requirements concerning material mistakes of fact were satisfied. The error was objectively verifiable, was not attributable to British Gas, and materially influenced GEMA’s reasoning. The case was principally one of inadequate transparency in consultation, rather than a culpable failure to pursue every possible inquiry, although GEMA remained free to seek further information before reconsidering the allowance.