Zenōbe Energy Limited v Gas and Electricity Markets Authority

The Competition Appeal Tribunal (CAT) issued its judgment on Zenōbe Energy Limited (Zenōbe) v the Gas and Electricity Markets Authority (GEMA) last month, on 23 June.

The case concerned GEMA’s proposed establishment of a ‘cap and floor scheme’ for long duration electricity storage installations and is one of a series of recent challenges to the Subsidy Control Act 2022 (the Act) that have asked the Tribunal to determine whether financial assistance by a public authority amounts to a subsidy.

In previous articles we’ve examined some of those challenges, including the recent case of Bristol Airport v Welsh Ministers. While similar to those cases, Zenōbe’s challenge was ultimately unsuccessful. In dismissing the case, the CAT did not determine whether the Long Duration Electricity Storage (LDES) Scheme did, in fact, amount to a subsidy. The judgment therefore provides public bodies (and other interested parties) with limited insight into when financial assistance will amount to a subsidy. It does, however, provide guidance on when a subsidy decision is made and the circumstances in which it will fall out with the scope of the CAT’s powers of review.

Background

The LDES Scheme was established by GEMA pursuant to its statutory duty under s10P of the Electricity Act (the EA) to “establish and operate” an LDES cap and floor scheme “as soon as reasonably practicable” after s10P coming into effect.

Section 10P came into effect on 18 February 2026 and, prior to that date, GEMA had undertaken preparatory work in relation to the LDES Scheme in anticipation of its new statutory duty. That preparatory work included decisions published in September 2025 and February 2026, which provided information about the design of the LDES Scheme.

The challenge

Zenōbe, an operator of short-term storage installations, claimed that the financial payments funded by GEMA and payable to the operators of long-term duration storage installations under the LDES Scheme would provide those operators with an unfair (and publicly funded) competitive advantage.

It challenged the September and February decisions as “subsidy decisions” under s70 of the Act, arguing that:

The payments amounted to a “subsidy” under the Act, and the LDES Scheme was, accordingly, a “subsidy scheme” for the purposes of the Act.
GEMA had failed to comply with its statutory obligations under the Act in relation to a subsidy scheme, including, amongst other matters, the need to have regard to the Subsidy Control Principles.

It also contended that the September and February “subsidy decisions” were ‘ultra vires’ – meaning that GEMA had acted unlawfully and outwith the scope of its powers when making them.

The CAT’s decision

The Tribunal dismissed Zenōbe’s application on all grounds. It held that:

Neither the September nor the February decision amounted to a “subsidy decision” under the Act.

The CAT held that neither decision was sufficient to establish the LDES Scheme – rather, each was a step in the preparatory process required to develop the scheme in advance of s10P of the EA coming into effect. This meant that GEMA’s obligations under the Subsidy Control Act (SCA) in relation to a subsidy scheme (i.e. the need to have regard to Subsidy Control Principles) were not engaged.

If GEMA had made a subsidy decision, that decision was made pursuant to a statutory duty.

The CAT held that s10P required GEMA to establish and operate the LDES Scheme – the fact that GEMA had discretion as to the design of the scheme did not detract from that.

If GEMA had made a subsidy, that decision was outwith the scope of the CAT’s powers of review under s70 of the Act.

This was because the decision was made pursuant to GEMA’s statutory duty under s10P of the EA. Section 78 and Schedule 3 of the Act provide that where a subsidy scheme is established under a duty imposed by primary legislation, it is exempt from certain provisions of the Act, including the CAT’s power of review under s70.

As no subsidy decision had been made, and if one had it was made under s10P of the EA, GEMA had acted lawfully and within the scope of its powers.

Key takeaways

The CAT’s decision that GEMA had not made a “subsidy decision” meant that it was not required to engage with the key issue at the heart of the subsidy control regime, i.e. was the LDES Scheme a subsidy scheme? That notwithstanding, the case does provide helpful jurisprudence on when a subsidy decision will be made and the circumstances in which it will be exempt under the Act:

Preparatory steps in the development of a subsidy scheme are not sufficient to constitute a subsidy decision, and regard must be given to the context in which a scheme is being developed. In this case it was clear that the September and February decisions were part of a “significant, multistage project to establish the LDES Scheme” but that they did not make the scheme themselves.
A subsidy created pursuant to a statutory duty (rather than merely a statutory power) will engage the exemption provisions of the Act and, accordingly, fall out with the scope of the Tribunal’s powers of review.

Interestingly, the judgment also provides insight into the Tribunal’s jurisdiction in relation to judicial review proceedings. While Zenobe’s ‘ultra vires’ challenge was ultimately unsuccessful, the case confirms that the Tribunal is not confined to considering “subsidy control issues” and is permitted to consider separate judicial review arguments that arise in the specialist field of subsidy control. Parties are therefore permitted to bring concurrent challenges under the Act, and on public law grounds, to the Tribunal, which recognised that:

“It would be highly undesirable, and inconsistent with considerations of procedural economy, for an interested party aggrieved by a subsidy decision on multiple grounds (including breaches of the SCA and other public law grounds) to have to raise parallel proceedings in the Tribunal, on the one hand, and in the High Court of England & Wales or Northern Ireland or in the Court of Session, on the other.”

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