The High Court (Mrs Justice Andrews) handed down judgment allowing British Gas’s claim for judicial review of the price cap which Ofgem imposed on the energy prices charged by suppliers to consumers under the Domestic Gas and Electricity (Tariff Cap) Act 2018.
British Gas challenged one aspect of the price cap – Ofgem’s allowance for the wholesale costs of energy for the first quarter of 2019 – on the basis that Ofgem’s decision was premised on an assumption regarding suppliers’ wholesale purchasing strategies on which it had not consulted. It further contended that Ofgem’s assumption was wrong insofar as large suppliers had in fact adopted different purchasing strategies such that the allowance was vitiated by an error of fact.
The Court held that Ofgem’s assumption was material to its assessment that the proposed wholesale allowance was sufficient to cover average supplier costs and Ofgem’s broader decision; and that fairness therefore required Ofgem to disclose it to consultees to enable an informed response. Further, the assumption was demonstrated to be wrong such that Ofgem’s decision was premised on a material error of fact. The Court declared Ofgem’s decision unlawful and directed it to reconsider the relevant wholesale costs allowance. However, it did not quash the price cap, which remains in place.
The full judgment can be read here.
Michael Fordham QC represented British Gas.
Alan Maclean QC, Jessica Boyd and Tom Coates represented Ofgem.