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The Competition and Markets Authority has published its final determinations in the first appeals under the new statutory licence modification appeal process applicable to the UK energy sector.

British Gas and Northern Powergrid brought appeals against Ofgem’s determination of the applicable price controls for electricity distribution for the next eight years.  These are the first appeals brought under the new statutory procedure set out in section 11 of the Electricity Act 1989, so the CMA’s determinations are now the leading authority on the conduct of such licence modification appeals and the standard of review to be applied by the CMA.
In respect of British Gas’ appeal, the CMA rejected all but one of the six grounds of appeal advanced by British Gas, almost entirely upholding the price control determination applied by Ofgem to distributors.  On the one ground that the CMA partially upheld, the CMA determined that Ofgem had been entitled to recalibrate one of the incentives (the Information Quality Incentive), but that the quantum of the recalibration made was, on the facts, excessive.  The CMA made a small consequential adjustment to that recalibration. In respect of Northern Powergrid’s appeal, the CMA dismissed two of the three grounds of appeal in respect of real price and regional labour adjustments; and upheld one ground of appeal in respect of savings relating to smart technology.  The CMA’s decision gives guidance as to the ambit of a sectoral regulator’s expert judgment in the context of a complex price control.
The CMA’s final determination in the British Gas and Northern Powergrid appeals can be read in the attached documents.

From Blackstone Chambers:
Pushpinder Saini QC, Alan Maclean QC, Jane Collier, Hanif Mussa, Tom Mountford and Tom Coates acted for Ofgem.
Michael Fordham QC, Iain Steele and Fraser Campbell acted for Southern and Scottish Energy Plc (interested parties to the appeals).

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