The Supreme Court allowed an appeal by Viridian Power Limited and Huntstown Power Company Limited over whether they could include the Carbon Revenue Levy in bids to sell electricity. In a judgment delivered on 23 February 2012, Mr Justice Hardiman concluded that the levy was a short-run marginal cost under the companies’ licences and said he would quash the Commission for Energy Regulation’s directions prohibiting them from bidding it in.
The appeal concerned directions requiring the companies not to include the levy when calculating their offers in Ireland’s all-island Single Electricity Market. The levy, introduced by the Electricity Regulation (Amendment) (Carbon Revenue Levy) Act 2010, applied in the Republic of Ireland. The Court was told, without dispute, that it cost the applicants about €18 million a year.
The companies argued that the levy was an unavoidable cost of generating electricity using fossil fuels and had to be included in the “total costs” used to calculate short-run marginal cost under their generation licences. The Commission accepted that the levy was a cost in the ordinary sense but argued that it lacked an “opportunity cost” under the Bidding Code of Practice and therefore could not be included. The Attorney General submitted that the levy was on revenue, not carbon, and that the Oireachtas had avoided changing the market’s pricing rules because the market crossed jurisdictions.
The High Court had refused the companies’ requested relief. It found that the levy was a cost in the ordinary sense but held that it was not an opportunity cost under the Code because it was not an item employed in generating electricity. That decision was appealed.
Justice Hardiman held that “total costs” meant all costs of the relevant kind and that the Code addressed how costs were valued, rather than excluding items from the total. He found the levy was directly related to emissions and was a legally unavoidable short-run marginal cost. He also rejected the proposed distinction between the levy and the cash used to pay it, and considered it inconsistent to allow fuel VAT or excise duty in bids while excluding the levy.
The judgment allowed the appeal and stated that the Commission’s directions would be quashed. The source does not set out the wording of a separate final order or address any further relief sought.