The High Court dismissed judicial review applications by Viridian Power Limited, Huntstown Power Company Limited and Endesa Ireland Limited, ruling that their electricity generation licences did not permit them to include the carbon revenue levy in bids to the all-island wholesale electricity market.
In a judgment delivered on 9 June 2011, Mr Justice Clarke found that the Commission for Energy Regulation had correctly interpreted the licences and the Bidding Code of Practice when it directed the companies not to include the levy in their commercial offer data. The court did not quash the directions.
The levy, introduced by the Electricity Regulation (Amendment) (Carbon Revenue Levy) Act 2010, required generators to pay an amount based on their carbon emissions. The companies argued that their licences allowed them to include the levy as a cost of generating electricity. The Commission said the levy could not be passed through in bids. The Attorney General, joined as a notice party to address the public interest, supported the Commission’s position.
The court examined the licence requirement that bids reflect short-run marginal cost, calculated using the opportunity cost of relevant items. The Bidding Code of Practice defined opportunity cost by reference to the benefit forgone when a cost item is used for electricity generation rather than its most valuable alternative use. Mr Justice Clarke concluded that the levy arises incidentally from generation; it is not an input employed to produce electricity and therefore does not have an opportunity cost under that definition.
The judge said the court’s task was to interpret the licence objectively, rather than defer to the Commission’s interpretation. He also held that the 2010 Act did not alter the existing licensing terms: if the Oireachtas intended to change those rights and obligations, it would have needed to do so expressly. His conclusion on the licence meant the Act did not affect the outcome.
Endesa’s application was brought about four months after the direction it challenged. The court found that delay was not a bar to relief and, to the extent necessary, extended time for the application. That did not change the result: both applications were dismissed. The court also rejected the companies’ claim that the Commission had relied on improper considerations, holding that the directions required compliance with the licences as interpreted by the court.