In R (on the application of Utilita Energy Ltd v Secretary of State for Business, Energy & Industrial Strategy [2019] EWHC 2612 (Admin), the High Court dismissed Utilita Energy Ltd (Utilita’s) application for judicial review of three decisions relating to the Government’s smart metering programme.

Key Points

  • Public authorities are entitled to delay public consultation on matters where they lack the necessary information to proceed.
  • Wider policy objectives can be taken into account when determining if a public authority has given due regard to specific factors, even if those policy objectives are broad and high level.

Background

The Smart Metering Implementation Programme (“SMIP”) set out the Government’s policy that every British home should have a smart electricity meter by the end of 2020, in order to encourage greater energy efficiency and facilitate switching to cheaper tariffs. Unlike first generation smart meters (“SMETS1”), second generation meters (“SMETS2”) are not tied to a particular supplier’s operating system, meaning customers can switch suppliers without losing smart functionality. Some SMETS1 meters are eligible to be enrolled in a universal communications system run by the Data Corporation Company (“DCC”), which means that they do not require a replacement with SMETS2 to gain interoperability.

The Government imposed a duty (the roll-out duty) requiring energy suppliers to take all reasonable steps to ensure that all SMETS1 meters are either DCC enrolled or upgraded to SMETS2 on or before 31 December 2020. This duty required a change to the standard licence conditions for gas and electricity suppliers.

The Government’s decision followed the issuing of two consultation papers in April 2018. The first dealt with achieving interoperability via the roll-out-duty whilst the second discussed whether the DCC should offer enrolment services to four of the six brands of SMETS1 meters. The two other SMETS1 brands, which include the ‘Secure’ meter, were not considered at this point but the Government noted its intention to consult on these once it had sufficient commercial and technical information available.

The Claimant, Utilita, is an energy supplier which uses Secure meters. Utilita’s customer base consists largely of pre-payment customers, who are more likely than other customers to be elderly, disabled, or from a low-income background. Utilita sought to challenge three Government decisions relating to SMIP:

1). The 4 October 2018 decision to modify the standard licence conditions in order to impose the roll-out duty (the First Decision);

2). The 4 October 2018 decision that SMETS1 meters installed after March 2019 would not count towards an energy supplier’s installation target (“the Second Decision”);

3). The 23 May 2019 decision that the DCC should be required to provide services to the type of SMETS1 meters used by Utilita (“Secure Meters”) in order to enrol them (“the Third Decision”).

Judgment

Utilita sought to challenge the decisions on the grounds of irrationality because the Government had left it in a materially different position to suppliers who, by virtue of using the four DCC-eligible brands, knew for a fact that they were not required to replace their SMETS1 meters by the end of 2020. Utilita argued that since the need to replace the SMETS1 meters was contingent on there being no option to enrol with the DCC, all consultations should have occurred simultaneously.

Lewis J rejected Utilita’s submissions. Suppliers using eligible brands were in a different factual position by virtue of the level of information the Government had on these brands. The Government had made clear its proposal to consult later on Secure Meters once it had the relevant information. The Government’s decision to require mandatory SMETS1 enrolment or replacement within a specified timeframe, and to consult on DCC enrolment only when it had sufficient information was neither irrational nor unlawful; it was a regulatory policy decision within the Secretary of State’s discretion. As a matter of law consultations on decisions which are linked do not need to proceed at the same time. The Court held that the fact that decisions could have been taken differently or in an alternative order did not render them irrational or unlawful.

Utilita’s attempt to challenge on the grounds of inadequate consideration of SMIP’s environmental impact also failed. Lewis J noted that Section 3A(5)(c) Electricity Act 1998 required the Secretary of State to “have regard to the effect on the environment of […] the provision of smart meter communication service”. This duty had been met as the Government’s underlying policy objective was the promotion of more efficient energy use. The Government’s broad policy objective was sufficient to prove that it had considered its specific duties under the Act.

The Court further rejected Utilita’s submission that the Government had breached its duties under s.149 Equality Act 2010 requiring the consideration of individuals with protected characteristics. 93% of Utilita’s customer base were on pre-payment plans and were statistically more likely to fall into these categories. In reaching this conclusion the Court confirmed that the Government must have regard to the need to consider those with protected characteristics, but is not duty bound to achieve a specific result. Lewis J noted that the Government had clearly factored in considerations about the benefits to consumers generally, which included those with protected characteristics, and had considered pre-payment customers specifically.

The submission that the Government, whilst calculating the cost-benefits of the Third Decision, made material errors of assessment and factored in irrelevant considerations was also rejected. Utilita failed to establish any public law error in the Government’s approach to the calculations. In any event Lewis J considered, under section 31 of the Senior Courts Act 1981, that the outcome would not have been substantially different if the costs Utilita wanted had been included, as there was still a calculable net cost-benefit to the policy.

The High Court dismissed Utilita’s claim for judicial review of the First and Second Decisions on all grounds. The Court also held that there were no arguable grounds for challenging the Third Decision’s validity and therefore refused permission for that aspect of the challenge.

Comment

The decision reflects the wide discretion afforded to the Government on matters of consultation and policy. Even though replacing SMETS1 meters was contingent on them not being enrolled in the DCC scheme, the Government had no duty to consult on these issues simultaneously. The Claimant was able to identify various aspects of the decisions that could have been done differently, such as the timing of consultations and the matters to be included in the cost-benefit calculations. However such arguments will not usually be sufficient to justify the court overturning the decision of a public body.  A claimant needs to identify a matter that has been dealt with unlawfully rather than simply one which could have been done differently. The case therefore serves as a reminder of the difficulties in challenging decisions made following a thorough consultation process and where broad policy objectives are involved.

 

Andrew Lidbetter
Andrew Lidbetter
Partner
+44 20 7466 2066
Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
Jasveer Randhawa
Jasveer Randhawa
Of Counsel
+44 20 7466 2998