The High Court has refused a judicial review challenge by Shannon LNG Limited and Shannon LNG Energy Limited to a planned reform of gas transmission tariffs, finding that the regulator’s core decisions were legally open to it. The court did not approve final tariffs, which had yet to be calculated.
The companies challenged a 29 June 2012 decision by the Commission for Energy Regulation (CER). It proposed treating Bord Gáis Éireann’s two undersea gas interconnectors from Scotland as part of an integrated transmission system, rather than as separate assets whose costs were recovered at the UK entry point. It also chose, in principle, a forward-looking long-run marginal cost (LRMC) method for setting tariffs at entry points, alongside a mechanism to address any revenue shortfall.
The applicants argued that the proposed system could make new entrants pay for infrastructure they would not use, discriminate between users, and breach EU rules on cost reflectivity, cross-subsidies, competition and state aid. They said those questions could be challenged before the final tariff details were fixed.
The court rejected the regulator’s argument that the case was premature. It found that the CER had made definitive decisions to end the separate tariff treatment of the interconnectors and to adopt LRMC in principle. Those choices were sufficiently settled to be reviewed, even though the tariff methodology and actual charges remained unfinished.
On the merits, the court found no rule requiring interconnectors to be separately costed and tariffed. It also rejected the claim that LRMC was inherently unlawful. The court said the legislation required broad correspondence between total access-tariff revenue and the efficient costs of operating, maintaining and developing the transmission system. It did not require each entry-point charge to match the costs of a particular asset or facility.
However, the court did not decide whether the eventual tariffs would comply with the rules. Whether they created excessive or avoidable cross-subsidies, discrimination or competitive effects could be assessed only after the methodology was settled and applied to actual charges. It likewise found that no identifiable or quantifiable state aid was yet about to be granted. A related complaint was under consideration by the European Commission.
The court refused the relief sought. Its ruling addressed the CER’s decisions in principle; it did not set or approve the final tariffs, which the regulator intended to develop after further consultation.