In R (on the application of Tate & Lyle Industries Limited) v Secretary of State for Energy and Climate Change [2010] EWHC 2752 the High Court considered a decision of the Secretary of State following his review of the level of subsidy granted to the claimant pursuant to the Renewables Obligation. The Court held that the Secretary of State had not acted unfairly or in a discriminatory way in using updated costs data in his analysis, even though the analyses relating to other companies had been carried out on the basis of earlier costs data which resulted in a more favourable outcome for those companies.

Key points

  • Statutory powers of review must be exercised consistently with the obligation to apply a fair and non-discriminatory process in respect of all participants.
  • Similarly, the principle of equality in EU law requires that similar situations must not be treated differently unless differentiation is objectively justified.
  • However, the duty to act fairly and without discrimination does not necessarily compel a decision-maker to ignore new data, even where using that new data may result in oneparticipant being treated differently from other participants.  

Statutory context

Under European Directive 2001/77/EC (now Directive 2009/28/EC) the UK is obliged to take appropriate steps to encourage greater consumption of electricity from renewable energy sources. One of the measures taken is the Renewables Obligation, which takes effect in English law via the Electricity Act 1989 (as amended) ('EA89') and Orders made thereunder. Essentially, by imposing a requirement on electricity suppliers to source a proportion of their electricity supplies from renewable sources, as evidenced by surrendering a Renewables Obligation Certificate, or "ROCs", which are issued to renewable generators, the Government has provided a market based mechanism to give financial support to renewable electricity generation.

The Renewables Obligation Order 2002 (the '2002 Order'), made under the EA89, permitted electricity generated only from specified renewable sources to count towards discharging the Renewables Obligation. Each specified renewable energy source was eligible for 1 ROC for each MWh of electricity generated. In 2006, the Government conducted an Energy Review (the '2006 Energy Review'), which led to the Renewables Obligation Order 2009 (the '2009 Order'). Unlike the 2002 Order, the 2009 Order implemented a 'banding' system, which varied the level of electrical output required in order to earn 1 ROC depending on the renewable technology used. The purpose of this was to encourage the development of some of the more expensive technologies.

Factual background

The Claimant, Tate & Lyle, operates a sugar refinery. It installed dedicated biomass boiler houses to supply the majority of its energy requirements.

The 2006 Energy Review leading to the 2009 Order involved a complex consultation process, in which Tate & Lyle actively participated. As part of that process it submitted detailed expert reports containing evidence of production costs in respect of the technology used in its boiler houses.

Tate & Lyle was duly allocated a banding under the 2009 Order in respect of its technology. However, it considered that this allocation was erroneously based on wrong production costs, and commenced judicial review proceedings.

In the course of preparing his defence to Tate & Lyle's judicial review, the Secretary of State discovered an error in the figures used to predict the costs of Tate & Lyle's technology. He ordered an 'Early Review' pursuant to the 2009 Order, which allowed for the banding allocation to be revised in certain circumstances. The proceedings were stayed in the interim. On completion of the Early Review, the Government maintained its decision in respect of the banding allocated.

Tate & Lyle amended its claim, arguing that the error in the original banding allocation had been maintained and aggravated through the Early Review, and that as a result it was being deprived of appropriate subsidies, unlike those who used different technologies that had not been subjected to an Early Review. It claimed to be suffering a loss of £1.5 million per year as a result of the failure to allocate it the correct banding. It claimed that between the time when the bandings were initially allocated and the Early Review being carried out, there had been a substantial increase in the price of wholesale electricity. When this updated data was fed in to the financial analysis carried out as part of the Review, the result was that the revenue increased to a greater extent than the costs. This in turn meant that the level of support deemed appropriate for Tate & Lyle was lower than it would otherwise have been.

Judgment

In the amended claim, the principal issue before the Court was whether, in undertaking the Early Review, the Secretary of State was entitled to have regard to updated and increased wholesale electricity prices when analysing the claimant's position at a time when these figures had not been applied to other generators using different renewable sources. Tate & Lyle argued that since the trigger for the Early Review was the Department's own error, the Review should have been confined to correcting that error i.e. not taking into account increased wholesale electricity prices.

The Court found that the Secretary of State's powers entitled him to review one banding allocation without having to review all others. This power had to be exercised consistently with his overall obligation to treat all technologies fairly and without unjustified discrimination. The Court considered that in this instance, if the Secretary of State had ignored the new data, this would have resulted in an over-subsidy which would be contrary to the prohibition against competitive distortion attributable to State Aid. In such circumstances, he was not compelled to disregard it in the interests of consistency.

The Court noted that the basis of allocations will inevitably become outdated between reviews and the statutory scheme could not work at all if the underlying data had to be constantly updated. It was not justifiable to allocate Tate & Lyle an increased subsidy merely because others might also be receiving an over-subsidy pending a review of their technology.

Comment

Whilst the general starting point is that like cases should be treated alike, this case reiterates that it is not necessarily unfair or discriminatory to be treated differently, particularly if being treated the same would result in a situation of unlawfulness. It is unclear, but perhaps immaterial to this decision, whether the Court considered that the circumstances were such that there was no discrimination, or that there was discrimination but it was justified due to the unlawfulness that would otherwise result.

In circumstances where the Court found that Tate & Lyle would be over-subsidised if the old figures were maintained pending a review of all technologies, it is perhaps not surprising that the judgment went against it. Furthermore, the decision reflects the general approach of the Courts to challenges in areas involving complex technical and/or economic issues. Insofar as the public body or regulator relies on complex economic data which is not obviously wrong or irrational, the Court is likely to defer considerably to the public body or regulator, giving claimants a high – but not necessarily insurmountable – threshold to overcome.