Expert legal advice from the competition lawyers

Energy licence modification appeals

First published by Author on March 02, 2022 in the following categories: Consumer Law Industry Investigations and tagged with | | |

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Last year in March 2021, nine companies appealed to the Competition and Markets Authority (CMA) against Ofgem’s changes to energy licences. A price control decision made by Ofgem in December in the previous year resulted in changes to the prices that energy companies could charge to customers. As the energy licence modification appeals progressed, permission to appeal was granted and hearings were set for later in the 2021 period.

This case was not the first time Ofgem’s policy changes have been met with opposition from energy companies, with several energy companies participating in another appeal against the gas and electricity regulator, which concerns its changes to transmission charges.

As the competition regulator, the CMA can give a final decision on the energy license modification appeals once all matters have been considered. A final order was subsequently published at the end of last year, and you can read the relevant information and outcomes here.

The energy licence modification appeals – what did energy companies object to?

The energy licence modification appeals concerned, in part, worries over the profits companies can make from anticipated investments over the following five years, as the new Ofgem decision could apparently limit the returns. In addition, Ofgem’s changes to licences reportedly took account of the sums that would be expended on maintaining and investing networks, but the energy companies involved in the appeal objected to the calculations.

According to the CMA, the nine energy companies who appealed against Ofgem were:

  • Cadent Gas Limited
  • National Grid Electricity Transmission plc
  • National Grid Gas plc
  • Northern Gas Networks Limited
  • Southern Gas Networks plc and Scotland Gas Networks plc (joint application)
  • Scottish Hydro Electric Transmission plc
  • SP Transmission plc
  • Wales & West Utilities Limited

Source: CMA.

From the perspective of consumers

Citizens Advice, the consumer and legal advice charity, weighed in on the energy licence modification appeals from the perspective of consumers. The charity previously sought permission to intervene directly in the appeal proceedings, meaning they were asking to be given permission by the CMA to give arguments against the appeal.

In a statement published on 23rd April, Citizens Advice argued:

“Allowing these appeals would grant the appealing network companies significant additional revenue, to be funded by consumers, without any related improvement in service or investment. We do not believe that this is justified.”

How the appeals proceeded

As the permission to appeal was granted, clarification hearings took place over the course of 2021, with the main hearings in the case beginning around the middle to the end of the year. Provisional determinations were then set to be revealed by the CMA in August, with the deadline on the final decision being set for 30th October 2021.

A final order and determination was then published at the end of 2021.

As an industry which affects all consumers, matters of competition and the law are often contentious in the energy sector, so it is important that all significant changes to prices made by regulators and energy companies are appropriately scrutinized. We want to see that all consumers are getting a fair deal, whilst also ensuring that companies are not unfairly burdened.

This is especially important at a time when real wage growth has been down for many, and the cost-of-living crises and higher taxes shortly to be introduced are burdening many people. This is notwithstanding the impacts of market forces on costs and supply, all of which hit people hard and made it difficult for some to be able to easily afford their energy bills.

IMPORTANT: advice on this page is intended to be up-to-date for the 'first published date'.

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