Yesterday, the Court of Appeal upheld the High Court’s decision that the Department of Energy and Climate Change acted illegally when it tried to reduce tariff rates in December.

The written judgement issued by Lord Justice Moses indicates that the December 12 referral date, proposed during Government’s consultation, could not be applied retrospectively. Lord Justice Moses did not accept that the Secretary of State for Energy and Climate Change was “free to introduce new and, if necessary, reduced rates as he determines necessary.”

Instead, Lord Justice Moses ruled that: “An owner of an installation is entitled to payment at a rate fixed by reference to and from the year in which the installation became eligible… The proposed modification has retroactive effect. If it comes into force on April 1, 2012 it takes away that pre-existing right to 25 years of payments at 43.3p/kWh and substitutes for it a right to that sum only for a few months and thereafter at the lower rate proposed of 21p/kWh.”

Interestingly, Lord Justice Moses ruled on a different basis to Mr Justice Mitting, who presided over the initial High Court hearing. Clare King, a renewable energy lawyer at Osborne Clarke, explained:

“In the High Court, Mr Justice Mitting submitted that in setting a reference date of December 12 2011, the Secretary of State was not furthering the purpose of the statute, which is to encourage small-scale low carbon generation of electricity. In the Court of Appeal, Lord Justice Moses submitted that the correct question was not whether the intention was to further the statutory purpose, but whether the Secretary of State had the power to use the statute in this way, i.e. to make retrospective changes to the FiT scheme. In his learned opinion, the Secretary of State did not have this power.”

King added: “Furthermore, on the issue of retrospective effect of the Secretary of State’s proposals, Mr Justice Mitting looked at whether the proposed modifications would have an adverse effect on the solar industry. In Mr Justice Mitting’s view, they would and so he ruled accordingly. In the Court of Appeal, Lord Justice Moses again took a step back from the question raised by Mr Justice Mitting and stated that the correct question should in fact have been whether or not Parliament had actually conferred on the Secretary of State the power to make a modification with retrospective effect. Lord Justice Moses submitted that it had not, and so the actions of the Secretary of State in making a retrospective modification would be invalid.”

DECC’s next legal step – The Supreme Court

DECC has now looked to apply for leave to appeal the case at the Supreme Court. SPP sources indicate that the Court of Appeal will most likely refuse DECC permission to appeal to the Supreme Court. However, DECC can seek permission to appeal directly from the Supreme Court itself.  Speaking with the Supreme Court yesterday, SPP learnt that if DECC’s case is taken on, it will most likely take several months to reach the courtrooms.

A spokesperson for the Supreme Court explained: “We will first have to decide whether the case fits the Supreme Court’s criteria – a process which can take several weeks. If the case is deemed appropriate to be heard, it can then take several months to reach the courtrooms due to the availability of the barristers coupled with the availability of the court.”

This will mean that any Supreme Court hearing will most likely occur after March 3 – the date at which proposals laid before parliament, which reduce the feed-in tariff, will come into effect. As a consequence there is unlikely to be any clarity over feed-in tariff rates for systems installed between December 12 and March 3 before the lower FiT rates are implemented.

In a written ministerial statement, Energy and Climate Change Secretary Chris Huhne, explained the decision: “The reason for appealing is that we want to maximise the number of installations that are possible within the available budget for FiTs, rather than use available money to pay a higher tariff to half the number of installations. In the meantime, we want as far as possible to minimise the uncertainty for PV and other technologies eligible for support under FiTs.  We are therefore still intending to publish the phase 2 consultation by February 9. This will include proposed tariffs for other FiTs technologies and a set of reform proposals for the scheme. We are also intending to publish the Government’s response to the other aspects of the phase 1 consultation that are not affected by the Judicial Review (namely the proposals on energy efficiency and for multi-installation tariff rates).” 

The implications of all this for installers is that they are still not able to tell customers whether or not they will receive the higher FiT rates (i.e. 43.3p/kWh) until the Supreme Court make a decision. As the Supreme Court is unlikely to make a decision before March 3, installers will never be able to guarantee prospective customers the higher FiT rate.

Many in the solar industry believe that DECC is deliberately appealing the decision at the Supreme Court to prolong uncertainty over feed-in tariff rates. By delaying the legal process, DECC hopes to limit another potential ‘goldrush’, should the feed-in tariff rates return to the previous, higher level.