Friday the thirteenth, they say, is unlucky for some. Whether Friday 13 January will prove to have been unlucky for the Department of Energy and Climate Change (DECC) or for Friends of the Earth and the solar photo-voltaic (PV) industry will not be revealed until judgment is handed down by the Court of Appeal on DECC’s application to appeal the High Court’s decision which held that DECC had a case to answer in relation to the legality of proposed changes to the Feed-in Tariff (FIT) scheme for PV installations.

The case was to be heard as a ‘rolled-up’ action (that is, with the application for permission to appeal and, if granted, the appeal itself following on the same day). Hearing detailed submissions from both parties, however, the three judge bench was unable to decide whether DECC’s application should be granted and the judges instead indicated that they will endeavour to hand down their judgement as quickly as possible, hopefully before 9 February.

The High Court’s earlier decision, which we reported on previously, found that the proposed approach to implementing the reduced tariffs for PV was inconsistent with the FITs scheme’s statutory purpose of encouraging small scale, low-carbon electricity generation. DECC argued that while the Secretary of State’s proposals were novel, Mr Justice Mitting had erred in finding that DECC had a case to answer for the following reasons:

  1. The class of people affected by the changes was so small (only those with installation dates between 12 December 2011 and 1 April 2012 are affected);
  2. Those who were affected had had sufficient notice of the proposed changes to enable them to apply for eligibility prior to 12 December;
  3. The reduced tariff still represents a fair rate of return (around five percent);
  4. The powers conferred on the Secretary of State under s.41(1) of the Energy Act 2008 (the “Act”) to amend FIT rates, while constrained by s.41(2) of the Act in that any modification must be for the purpose of establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage small-scale low-carbon generation of electricity; were nonetheless, sufficiently wide (as demonstrated by the range of examples set out in s.41(3) of the Act) to empower the Secretary of State to make amendments of the kind anticipated by the proposals; and
  5. The introduction of a reduced tariff for installations with an eligibility date after 12 December from 1 April was not a proposal with retrospective effect: the proposal was that electricity generated on or after 1 April 2012 will be entitled to a tariff of 21p per KWH from 1 April 2012, and this could not be construed as having a retrospective effect.

Disputing these arguments, solicitors for Friends of the Earth and the PV industry submitted that:

  1. It is a well-established principle of UK law that legislation shall not be construed as being capable of having retrospective effect against those with vested rights unless that retrospective effect is clearly intended by the provisions of the legislation;
  2. As no such intention is discernible from s.41 of the Act, the proposals - which will affect vested rights created in the period between 12 December and the passing of the amendments - are therefore out with the scope of the Secretary of State’s powers;
  3. Modifications of the kind proposed by the Secretary of State were contrary to the objectives of s.41 of the Act;
  4. The uncertainty created by the proposals impacted on fairness and amounted to an abuse of power by the Secretary of State.

Should DECC win its application for appeal, and ultimately be successful in its appeal, it will presumably proceed with its proposals as originally set out in October last year. If unsuccessful however, the High Court’s decision, which enables Friends of the Earth to seek a judicial review of the proposals, will stand, leading to further courtroom wrangling, delays and legal uncertainty.

Whatever is decided, the effect of Friday’s hearing is that stalemate continues and the PV industry remains in a state of flux. The uncertainty currently plaguing stakeholders will continue and potential investors will remain reluctant to commission new installations for which the rate of return cannot be guaranteed.

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