Ofgem fights off transmission charge challenge

23 Jul 2015

The High Court has today dismissed a challenge to energy regulator Ofgem’s decision to approve changes to the way electricity generators pay for access to the onshore electricity transmission system for Great Britain (the ‘national grid’).

The owners of the transmission system incur costs in investing in the transmission system in response to the demands placed on it. Those owners are entitled to recover their investment from transmission system users, who include power station operators and other generators. Generators pay charges, known as Transmission Network Use of System (TNUoS) charges in respect of their access to the system for transporting electricity.

Under the changes to the TNUoS charging methodology which Ofgem approved, a certain element of the TNUoS charges will be paid only by “conventional generators”, i.e. gas fired, nuclear and other generating plants that can be relied on to generate at times of peak electricity demand. “Intermittent generators”, such as wind and solar farms, are dependent on weather conditions for being able to generate. They would not have to pay the relevant element of the TNUoS charges. Ofgem considered that this difference in treatment between conventional, as compared with intermittent, generators reflected differences between those two classes of generators in terms of how generators’ requirements for transmission system access drive investments by the transmission owners in upgrading system capacity at particular locations.

RWE NPower challenged Ofgem’s decision, arguing that it was unjustifiably discriminatory and therefore contrary to the EU Electricity Directive (Directive 2003/54/EC). RWE also argued that Ofgem had misunderstood the concept of “cost-reflectivity” in the Directive. Further, RWE alleged that  the decision would give rise to unlawful State aid, including by undermining the factual basis on which the European Commission gave State aid approval for the ‘Renewables Obligation’ and other UK schemes for encouraging low carbon generation.

The judge (Mr Justice Lewis) has dismissed the claim in full.

Ofgem was represented by Monckton barristers Daniel Beard QC, Alan Bates and Daisy Mackersie.