SCOTTISHPOWER ENERGY RETAIL LIMITED (R on the application of) v THE GAS AND ELECTRICITY MARKETS AUTHORITY

A regulator entrusted with a broad statutory discretion may adopt policies or principles to promote consistency, but must remain willing to consider exceptions and individual circumstances. Published assessment criteria do not create an entitlement to public funding where the statutory scheme confers a wider evaluative discretion.

In reviewing a specialist market regulator’s decision, the court applies a restrained reasonableness review. It asks whether the decision falls outside the range of reasonable decisions or contains a fundamental flaw in reasoning. Reasons need only explain the principal important issues intelligibly and adequately. A reasons challenge also requires substantial prejudice.

Extra Energy Supply Limited ceased trading, and the Gas and Electricity Markets Authority appointed ScottishPower Energy Retail Limited as Supplier of Last Resort. ScottishPower sought a Last Resort Supply Payment from the industry levy for various costs, including approximately £3.1 million in customer debt incurred after customers transferred to it.

Ofgem allowed most of the claim but refused the debt element. ScottishPower sought judicial review, alleging that Ofgem had fettered its discretion, acted irrationally and failed to give adequate reasons. The central issue was whether Ofgem lawfully exercised its broad, case-by-case discretion when treating customer debt as a commercial risk rather than a reasonable cost for levy recovery.

1. Ground 1 dismissed. A public authority may establish a policy or principle governing a discretion. That is not a fetter unless the authority excludes the possibility of exceptions. The authority must remain willing to listen to materially new considerations, applying the principle in British Oxygen Co Ltd v Minister of Technology [1971] AC 610.
2. Ofgem had no pre-existing policy on customer-debt claims because the claim was novel. It gathered information, met ScottishPower, considered the published criteria, consulted on its provisional position and considered whether future cases might justify recovery. Its final decision remained expressly case-specific and did not establish an inflexible rule.
3. The published criteria were subjective heads of assessment within a wider analysis. They were not an exhaustive or empirical test and did not confer an entitlement to an LRSP when satisfied. Ofgem lawfully considered the statutory objective of protecting consumers and the wider effects of allocating commercial debt risks to the industry levy. The claim was therefore not a legitimate expectation case.
4. Ground 2 dismissed. Review of the specialist regulator’s decision required a wide margin of appreciation. Following R v Director General of Telecommunications ex p Cellcom [1999] ECC 314, the court would not substitute its assessment for Ofgem’s economic and regulatory judgment. The decision distinguished customer debt from costs more directly connected with onboarding and credit-balance protection. That distinction was reasonably open to Ofgem and disclosed no fundamental logical or methodological flaw. The approach was consistent with the analysis in Npower Direct Ltd v Gas and Electricity Markets Authority [2018] EWHC 3576 (Admin).
5. Ground 3 dismissed. Ofgem’s reasons explained why debt was treated differently, why it fell outside the reasonable scope of the claim, how consumer protection informed the balance and why allowing some other costs did not require allowing debt. Under South Bucks District Council v Porter (No 2) [2004] UKHL 33, reasons need be intelligible and adequate, not exhaustive. ScottishPower also failed to establish substantial prejudice.
6. The claim for judicial review failed and was dismissed.