In an investor note, the group said the decision by the Competition and Markets Authority (CMA) to uphold two out of the eight grounds of appeal brought to it by British Gas and Northern Powergrid “clarifies the body’s new approach to regulatory appeals”.
“The CMA’s approach supports our view that appeals are likely to become a more regular feature of energy price determinations under the new regulations, since appellants do not run the risk that favourable elements of the determination might be reopened,” it said.
Moody’s vice president and senior analyst Graham Taylor explained the CMA will only modify Ofgem’s decision to the extent that it’s wrong, without reopening other elements of the review. This, he said, makes appeals of future determinations far more likely, because the risks to appealing have been greatly reduced.
“In the past, a company could feel that they’d been treated unfairly on one element of the review but recognise that they had come off well on another; even if they won their argument on appeal, they might still be worse off if the CMA decided to look at the second element,” he told Utility Week.
“Now they’re allowed to cherry-pick, which removes that risk. The CMA will look only at the merits of their argument on the first point and probably won’t touch the second, unless someone else has appealed it or the issues are closely linked.”
These were the first appeals of price determinations in the energy sector since 1996, and the first since the Electricity and Gas (Internal Markets) Regulations in 2011 introduced important changes to the process.
“As we expected, the CMA has interpreted the new regulations narrowly, finding that it “must limit its consideration to the specific grounds of appeal set out in , to the extent that such grounds are raised by the appellants,” rather than reconsidering the entire price control as it would have done under the pre-2011 rules,” analysts said.