Viridian Power v Commissioner for Energy Regulation, [2012] IESC 13 (2012)

Docket Number:285/11
Judge:Denham C.J.
 
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THE SUPREME COURT[Appeal No: 285/2011]

Denham C.J.

Murray J.

Hardiman J.

Macken J.

McKechnie J.

Between/

Viridian Power Limited

and

Huntstown Power Company LimitedApplicants/Appellantsand

Commission for Energy RegulationRespondent and

The Attorney GeneralNotice Party

Judgment delivered on the 23rd day of February, 2012 by Denham C.J.

  1. This is an appeal by Viridian Power Limited and Huntstown Power Company Limited, the applicants/appellants, referred to as “the appellants”, from the judgment of the High Court (Clarke J.) delivered on the 9th June, 2011 and from the order of the High Court of the 23rd June, 2011 (perfected on the 29th June, 2011), whereby the High Court refused the reliefs sought by the appellants in the Notice of Motion of the 13th December, 2010.

  2. The appellants had, by Notice of Motion, sought the following reliefs:-

    “(a) An order of certiorari, by way of judicial review, quashing the purported decision of the respondent, dated 8 October 2010, directing the first named [appellant] to ensure that the price components of all Commercial Offer Data submitted by it in relation to any generation unit for which it is the licensed generator, do not include any amount in respect of the Levy paid or to be paid by it to the Commission pursuant to section 40D of the Electricity Regulation Act 1999 (as amended by the Electricity Regulation (Amendment) (Carbon Levy) Act 2010);

    (b) An order of certiorari, by way of judicial review, quashing the purported decision of the respondent, dated 8 October 2010, directing the second named [appellant] to ensure that the price components of all Commercial Offer Data submitted by it in relation to any generation unit for which it is the licensed generator, do not include any amount in respect of the Levy paid or to be paid by it to the Commission pursuant to section 40D of the Electricity Regulation Act 1999 (as amended by the Electricity Regulation (Amendment) (Carbon Levy) Act 2010);

    (c) If necessary, a Declaration, by way of judicial review, that the price components of the Commercial Offer Data submitted by the [appellants] or any of them in relation to a generation unit of which an [appellant] is the licensed generator may lawfully include the amounts in respect of the Levy paid or to be paid by the [appellants] to the Commission pursuant to section 40D of the Electricity Regulation Act 1999 (as amended by the Electricity Regulation (Amendment) (Carbon Levy) Act 2010.”

  3. In a reserved judgment delivered on the 9th June, 2011, the learned High Court judge dismissed the application.

  4. The appellants filed a Notice of Appeal on the 5th July, 2011, citing the following grounds of appeal:-

    “(a) The learned High Court judge erred in concluding that the Levy payable by the [appellants] pursuant to the Electricity Regulation (Amendment) (Carbon Revenue Levy) Act, 2010 (“the Levy”) is not required or permitted to be included as a price component in the [appellants]’ Commercial Offer Data submitted to the Single Market Operation Business under the Single Electricity market Trading and Settlement Code (hereafter referred to the Levy being “bid in”), pursuant to the Electricity Generation Licences granted by the respondent to the [appellants] (“the Licences”).

    (b) The learned High Court judge, having correctly concluded that the Levy was a cost attributable to the operation of the generating plants operated by the [appellants’] (para. 7.13 of the judgment), erred in not concluding that the Levy was thereby a cost liable to be bid in by the [appellants] in accordance with Condition 15 of the Licences.

    (c) The learned High Court judge erred in concluding that the terms of the Bidding Code of Practice could validly have the effect of precluding the bidding in of a cost (the Levy) which (as the judge concluded) formed part of the Short Run Marginal Cost relating to the generation units operated by the [appellants] within the meaning of Condition 15.3 of the Licences and was thus a cost which the [appellants] were required to bid in accordance with the principle of cost-reflective bidding mandated by Condition 15.

    (d) The learned High Court judge erred in his construction of Condition 15.4 and 15.5 of the Licences and, in particular (but without prejudice to the generality of the foregoing) erred in construing those provisions as permitting the respondent to adopt a Bidding Code of Practice the effect of which was to preclude the bidding in of costs properly coming within the scope of Condition 15 and, in particular, costs attributable to the generation of electricity as the judge found the Levy to be.

    (e) Without prejudice to the foregoing, the learned High Court judge erred in his construction of the Bidding Code of Practice and, in particular, paragraphs 7 and 8 thereof.

    (f) Without prejudice to the generality of the foregoing paragraph, the learned High Court judge erred in construing paragraphs 7 and 8 of the Bidding Code of Practice as permitting only the bidding in of costs items that are inputs into electricity generation and/or “employed” in the generation of electricity.

    (g) Further, and in any event, the learned High Court judge erred in concluding that the Levy was not an input into electricity generation and/or employed in the generation of electricity insofar as such was properly a requirement of the Bidding Code of Practice (which the [appellants] do not accept). In this regard, the learned High Court judge erred in holding that the Levy was materially different to other costs-items permitted to be bid in, such as (but not limited to) excise duties on fuels, employer taxes and other levies.

    (h) The learned High Court judge erred in concluding that the Levy did not have an Opportunity Cost for the purposes of Condition 15 and of the Bidding Code of Practice.

    (i) Further, or in the alternative, the learned High Court judge erred in holding that it is implicit in the Bidding Code of Practice, and in particular paragraphs 7 and 8 thereof, that only costs which are “inputs” into electricity generation may be bid in by generators. In this regard, the learned High Court judge erred in implying a term in the Bidding Code of Practice which is not provided for, and is not consistent with, the plain meaning of the Bidding Code of Practice as adopted by the Commission, construed by reference to the Licence.”

  5. The appellants, the Commission for Energy Regulation, “the Commission”, and the Attorney General filed written submissions on this appeal and counsel were heard by the Court from each party, including the notice party.

  6. The central issue in these proceedings is the interpretation of the Electricity Generation Licences, “the Licences” issued to generators, including the appellants, and so far as relevant, the Bidding Code of Practice, “the BCOP”, as they apply to the Carbon Revenue Levy, “the Levy”, imposed on certain electricity generators, including the appellants, pursuant to Part VIB of the Electricity Regulation Act, 1999, inserted by s. 3 of the Electricity Regulation(Amendment) (Carbon Levy) Act, 2010, “the Act of 1999, as amended”,

  7. In essence, this requires the interpretation of Condition 15 of the Licence and the BCOP.

  8. The main issue is whether the Levy required to be paid by the appellants under the Act of 1999, as amended, may be included in their prices when bidding in to supply electricity demands.

  9. The High Court held that the respondent had construed correctly the relevant terms of the Licence as not permitting the appellants to bid in the amount of the Levy.

  10. The decision of the High Court required the appellants, when submitting bids for the sale of electricity generated by them into the Single Electricity market, the SEM, must not include in the price components of such bids any amount in respect of a Levy which the appellants were obliged to pay in the event that they generated revenue by using fossil fuels to generate electricity, pursuant to Part VIB of the Act of 1999, as amended.

    Submissions

  11. Extensive written and oral submissions were received and heard from the parties. On behalf of the appellants, in conclusion, it was submitted that the learned trial judge erred in holding that the appellants were not entitled to the reliefs sought. It was submitted that the decisions of the Commission purporting to direct the appellants not to bid in the cost of the Levy had no basis in law. It was submitted that their submission is the conclusion the Court should reach. It was...

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