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Claimants successful in judicial review of OFGEM subsidy decision

Havant Biogas Ltd & Ors v Gas & Electricity Markets Authority [2021] EWHC 84 (Admin)

On Friday 22 January 2021 the Administrative Court quashed a decision by OFGEM (the UK’s energy markets regulator) not to register four special purpose vehicles as participants on the Non-Domestic Renewable Heat Incentive Scheme, a subsidy scheme promoting renewable energy. These four were part of a cohort of 37 applications which, if approved, will trigger c.£500m of investment in renewable energy projects.

The applicants had sought to use a “two-phase” model, which would allow them to build out their developments after obtaining registration. Although new regulations introduced in mid-2018 were designed to eliminate this practice, the applicants had applied before those new regulations came into effect. OFGEM nonetheless refused to register them, even though it had registered a number of identical projects in 2016. OFGEM denied that it was opposed to “two-phase” developments, but imposed purported requirements which had the effect of making new “two-phase” projects impossible to develop.

The claimants sought a judicial review of OFGEM’s decision. The three main grounds of challenge were that OFGEM (i) erred in law, (ii) had failed to take account of the claimants’ legitimate expectations, and (iii) had taken into account irrelevant considerations.

Fordham J found that Ofgem had misinterpreted and therefore wrongly applied the objectively correct meaning of the regulations and guidance, and that this error tainted all of Ofgem’s reasoning: “Given the way that themes recur and interrelate within the Operative Decision, and the need to read it as a whole, it is unlikely that any strand would have been insulated from error elsewhere”. He therefore quashed the decisions and remitted the matter to OFGEM, which must now issue new ones.

The case is an important reminder of the Administrative Court’s approach to interpreting statutory provisions, and of the public law duty to follow applicable guidance (absent good reason to depart from it).

Thomas Sharpe QC and Ben Lewy acted for the claimant SPVs in the judicial review proceedings, instructed by Ian Tucker of Burges Salmon LLP.

The full judgment is available here.