Ofgem has published a letter to the Competition and Markets Authority (CMA) asking the body to clarify its position on appeals against price control decisions by the regulator.
It says the responses to its consultation on the proposed methodology for setting the RIIO2 price controls exposed “a degree of confusion” over the appeals process.
The correspondence from executive director for systems and networks, Jonathan Brearley, notes that the CMA may block an appeal if it believes that the consequences of the alleged error are small enough to be “immaterial”.
Although it acknowledges that this may not be possible in all circumstances, the letter says the potential impact of an appeal should be considered before it is given the go ahead. It invites the CMA to “clarify its position in respect of materiality, both at the permission and substantive stage.”
The letter also highlights concerns over the “interlinkages between parts of the decision which are challenged and parts which are not challenged,” saying some respondents to the consultation complained that the appeals process “frustrates rounded consideration” by allowing appellants to set the boundaries of the case.
Brearley says it is Ofgem’s understanding that “for the CMA to find that a decision which is not dissociable from other aspects of the price control was wrong, the appellant must demonstrate that it is wrong having regard to the interlinked aspects.” He nevertheless asks the CMA to make clear where it stands on the issue.
He additionally cites fears over the potential workload if multiple appeals are filed, saying the regulator supports “a process by which concerns can be aired before an appeal is filed”.
This would help the CMA and involved parties to “narrow the issues in dispute” at the permission stage and “better identify and focus upon interlinkages and materiality” if it is granted.
“We invite the CMA to clarify its position on pre-appeal conduct, and insofar as possible to encourage appellants to engage in pre-appeal correspondence,” he adds.
Furthermore, the letter states Ofgem preference that “even in circumstances where appeals are heard separately, in appropriate circumstances it is possible, and may be desirable, for the CMA to hold a joint hearing to determine remedies for successful appeals in the round.”
Brearley asks to competition watchdog to state its position on this matter as well.
The RIIO2 price controls, which will determine how much energy networks are allowed to charge their customers over the following five years, are due begin in 2021 for all sectors other than electricity distribution.