“16. Decisions taken by regulatory authorities shall be fully reasoned and justified to allow for judicial review. The decisions shall be available to the public while preserving the confidentiality of commercially sensitive information. 17. Member States shall ensure that suitable mechanisms exist at national level under which a party affected by a decision of a regulatory authority has a right of appeal to a body independent of the parties involved and of any government.”
“32A.1 For any purposes connected with the Authority’s consideration of measures or behaviours which may impact on consumer engagement (‘consumer engagement measures’), the licensee must comply with a direction issued by the Authority in respect of Relevant Matters for Standard Condition 32A 32A.2 The licensee is not required to comply with a direction issued pursuant to 32A.1 unless the Authority has given the licensee at least 1 month’s prior Notice. 32A.3 A direction issued under paragraph 32A.1 may include a requirement to comply with any instructions from the Authority or a third party agent appointed by the Authority for the purposes of conducting any test of consumer engagement measures.”
“Article 37 sub-paragraph 16: Decisions taken by regulatory authorities shall be fully reasoned and justified to allow for judicial review. The decisions shall be available to the public while preserving the confidentiality of commercially sensitive information.” “Recital 37: Energy regulators should have the power to issue binding decisions in relation to electricity undertakings and to impose effective, proportionate and dissuasive penalties on electricity undertakings which fail to comply with their obligations or to propose that a competent court impose such penalties on them. Energy regulators should also be granted the power to decide, irrespective of the application of competition rules, on appropriate measures ensuring customer benefits through the promotion of effective competition necessary for the proper functioning of the internal market in electricity…. The independent body to which a party affected by the decision of a national regulator has a right to appeal could be a court or other tribunal empowered to conduct a judicial review.”
“Impact of trials on suppliers A concern was raised by a large supplier that the selection criteria’s impact would be disproportionate because they would cause an unequal impact on certain suppliers, based upon potential customer losses and damage to their commercial interests. A mid-tier supplier raised a concern over how costs of trials could be spread over a smaller customer base, particularly if the characteristics of that customer base meant it could be selected multiple times. We have considered these points in the context of the CMA’s recommendation of the trials programme as part of the remedies to address the domestic weak consumer engagement adverse effect on competition (“AEC”). In its summary of the remedies, the CMA stated: The above overarching feature of weak customer response, in turn, gives suppliers a position of unilateral market power concerning their inactive customer base. In relation to unilateral market power, our finding is that suppliers in such a position have the ability to exploit such a position… The full report states: The gains available to customers from promoting engagement are potentially high….We recognise that there will also be costs to suppliers of complying with the requirement to participate in the Ofgem-led programme (including, where used, RCTs) and implementing the resulting interventions. However, we note that our starting point for the proportionality of the Ofgem-led programme, and any individual decision subsequently taken by Ofgem in the context of the programme, is the scale of the detriment, which is very substantial. The CMA recognises that Ofgem is already obligated to consider the cost and proportionality of all its activities. In designing the programme, Ofgem will be required to assess the proportionality of the various stages involved in the programme, including the testing involved in each specific proposed measure. To ensure proportionality, we will choose research questions for trials that we believe stand a good chance of seeing positive consumer outcomes. We will also ensure that the scale of the trial is no larger than necessary to obtain robust results. We have revised criterion 2, to clarify that the assessment of proportionality is linked to capability, which will include size of supplier in relation to the scale of the trial. …….. 3. Burden of the trial is proportionate to a particular supplier A few respondents called for the costs of each trial to be shared between Ofgem and the supplier(s) involved. We do not consider it appropriate for Ofgem to fund the trials in part or in full. Our role in this area will be to supply the research questions for trials, based upon desired consumer outcomes, and to provide guidance to suppliers on how to undertake robust trials. We would also monitor the progress and outputs of trials. None of this would be a substitute for suppliers using their own resource and expertise to carry out the specified trial. In respect of the feedback on proportionality, we have already stated that we will take account of a supplier’s participation in previous Ofgem-led trials and its activities in the area of the research question. This is to encourage suppliers to take proactive steps to engage consumers who are not currently taking advantage of the competitive market. To take a supplier’s actions into account, there would need to be considerable alignment with the measures planned for Ofgem-led trial and any supplier-led testing would need to have been undertaken in a robust manner.”
“As part of the remedies to address this AEC, the CMA recommended that Ofgem establish a programme of work to provide customers with measures to prompt them to engage. It considered that suppliers have the ability to engage their existing customers through the regular communications they send to them, but they are likely to face limited incentives to do so. As such, the CMA recommended that this Ofgem-led programme should identify, test (through randomised controlled trials (RCTs), where appropriate) and implement measures to provide domestic consumers with different or additional information with the aim of promoting engagement in the domestic retail energy market. The CMA further recommended that we introduce a licence condition (SLC 32A) to require suppliers to participate in this programme, to ensure the programme’s effective implementation, for which it provided the draft licence condition wording. SLC 32A has two key features: (i) the power to direct licence holders to undertake testing and trialling; and (ii) information gathering powers. Both are with regards to us being able to use RCTs or other forms of testing to identify effective domestic consumer engagement measures.”
“This is agreed context. npower adopt the CMA’s description, and has made clear that it does not challenge the finding of an AEC in the terms set out by the CMA or the introduction of SLC32A by Ofgem as an important part of a package of remedies. npower agrees with the expressed importance of Ofgem using SLC32A to address the AEC. SLC32A is an important and necessary provision to help address an identified consumer detriment (an AEC identified by the CMA) and is not in question.”
“It is possible that the collective switch model as trialled in the first collective switch trial is a particularly effective way of addressing the AEC identified by the CMA (lack of customer engagement) and the resulting£1.4 billion of annual customer detriment caused by customers remaining on the SVT (Standard Variable Tariff). However, it is also possible that there was something unusual about the incumbent supplier and/or the particular group of its customers trialled, the time of year or other factors which led to the customer response rate being so high. Given the size of the detriment identified by the CMA and the number of customers affected (up to eight million customers), it is essential that Ofgem tests whether the results are replicable and whether such a service could be run at levels that would enable efficient and timely communications with affected customers.”
“A second area of concern was that an intervention being trialled might prove to be highly effective at prompting engagement and, as a result, a supplier loses a significant number of consumers either to another supplier or from a particular tariff type. The impact of this can be managed by ensuring that the burden of trials is fairly spread across suppliers, that the size of a trial is appropriate and proportionate – ie a trial with 200,000 customers should not be pursued when a trial with 40,000 customers is sufficient, and that by selecting suppliers of a sufficient size proportionate to the scale of the trial. However we do recognise the potential forsome commercial impact and would not consider this a valid reason for a supplierto avoid or be excluded from a trial. Of course, if a proposal was proven to be successful in promoting engagement, it is highly likely that we would seek to put this in place for all suppliers to facilitate competition.”
“It is well established that an obligation, whether statutory or otherwise, to give reasons for a decision is imposed so that the persons affected by the decision may know why they have won or lost and, in particular, may be able to judge whether the decision is valid and therefore unchallengeable or invalid and therefore open to challenge. There are numerous authoritative statements to this effect - see, for example, Thornton v Kirklees Borough Council[1979] 1 QB 626 at 638H, in the judgment of Megaw LJ; R v London Borough of Croydon, ex parte Graham(1993) 26 HLR 286 (a case to which further reference will be made) at page 291, where Sir Thomas Bingham MR said: "I readily accept that these difficult decisions are decisions for the housing authority and certainly a pedantic exegesis of letters of this kind would be inappropriate. There is, nonetheless, an obligation under the Act to give reasons and that must impose on the council a duty to give reasons which are intelligible and which convey to the applicant the reasons why the application has been rejected in such a way that if they disclose an error of reasoning the applicant may take such steps as may be indicated." 111. He went on to state: “(2) The court can and, in appropriate cases, should admit evidence to elucidate or, exceptionally, correct or add to the reasons; but should, consistently with Steyn LJ's observations in ex parte Graham, be very cautious about doing so. I have in mind cases where, for example, an error has been made in transcription or expression, or a word or words inadvertently omitted, or where the language used may be in some way lacking in clarity. These examples are not intended to be exhaustive, but rather to reflect my view that the function of such evidence should generally be elucidation not fundamental alteration, confirmation not contradiction. Certainly there seems to me to be no warrant for receiving and relying on as validating the decision evidence - as in this case - which indicates that the real reasons were wholly different from the stated reasons. It is not in my view permissible to say, merely because the applicant does not feel able to challenge the bona fides of the decision-maker's explanation as to the real reasons, that the applicant is therefore not prejudiced and the evidence as to the real reasons can be relied upon. This is because, first, I do not accept that it is necessarily the case that in that situation he is not prejudiced; and, secondly, because, in this class of case, I do not consider that it is necessary for the applicant to show prejudice before he can obtain relief. Section 64 requires a decision and at the same time reasons; and if no reasons (which is the reality of a case such as the present) or wholly deficient reasons are given, he is prima facie entitled to have the decision quashed as unlawful.”
“Ofgem had as a material purpose (if not the only remaining purpose given the circumstances) to achieve consumer switching and that achieving an outcome is an improper purpose for a power to carry out trials”
“Ofgem accepts that irrespective of whether the claimant has a A1P1 right, we have an obligation to act proportionately” (Transcript Day 2/page 99/lines 8-10). 125. On the premise that there has been interference, it is contended by npower that (1) Ofgem failed to assess the proportionality of the alleged interference; (2) Ofgem has not explained why a trial of this nature, scope and timing furthers the objective of SLC 32A (SFG, paragraph 56(ii)); (3) Ofgem failed to assess the costs / benefits of the trial or to consider alternatives: (SFG, paragraph 56(iii)); (4) Ofgem failed to strike a fair balance between the rights of npower and the interests of the community (collectively “the Four Submissions”). (b) The law 126. As regards proportionality, the starting point as cited in the SFG is the speech of Lord Reed in Bank Mellat v Her Majesty’s Treasury (No. 2) [2013] EWSC 38. The four arguments in the above paragraph are derived from the four criteria referred to by Lord Reed at paragraph 74. In order to see the criteria in context, it is worth considering Lord Reed’s speech at paragraphs 69-76 who said the following: “66. …In R v Ministry of Agriculture, Fisheries and Food, ex p Fedesa and others (Case C-331/88 )[1990] ECR I-4023 , the European Court of Justice stated (para 13): "The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued." The intensity with which the test is applied – that is to say, the degree of weight or respect given to the assessment of the primary decisionmaker - depends upon the context. [emphasis added] 70. As I have mentioned, proportionality is also a concept applied by the European Court of Human Rights. As the court has often stated, inherent in the whole of the Convention is a search for a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights (see eg Sporrong and Lönnroth v Sweden(1983) 5 EHRR 35 , para 69). The court has described its approach to striking such a balance in different ways in different contexts, and in practice often approaches the matter in a relatively broadbrush way. In cases concerned with A1P1, for example, the court has often asked whether the person concerned had to bear an individual and excessive burden (see eg James v United Kingdom(1986) 8 EHRR 123 , para 50). The intensity of review varies considerably according to the right in issue and the context in which the question arises. Unsurprisingly, given that it is an international court, its approach to proportionality does not correspond precisely to the various approaches adopted in contracting states. [emphasis added] 71. An assessment of proportionality inevitably involves a value judgment at the stage at which a balance has to be struck between the importance of the objective pursued and the value of the right intruded upon. The principle does not however entitle the courts simply to substitute their own assessment for that of the decision-maker. As I have noted, the intensity of review under EU law and the Convention varies according to the nature of the right at stake and the context in which the interference occurs.…in the Convention case law the principle of proportionality is indissolubly linked to the concept of the margin of appreciation. That concept does not apply in the same way at the national level, where the degree of restraint practised by courts in applying the principle of proportionality, and the extent to which they will respect the judgment of the primary decision maker, will depend upon the context, and will in part reflect national traditions and institutional culture. For these reasons, the approach adopted to proportionality at the national level cannot simply mirror that of the Strasbourg court. 72. The approach to proportionality adopted in our domestic case law under the Human Rights Act has not generally mirrored that of the Strasbourg court. In accordance with the analytical approach to legal reasoning characteristic of the common law, a more clearly structured approach has generally been adopted, derived from case law under Commonwealth constitutions and Bills of Rights, including in particular the Canadian Charter of Fundamental Rights and Freedoms of 1982. The three-limb test set out by Lord Clyde in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing[1999] 1 AC 69 , 80 has been influential: "whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective." "The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued." The intensity with which the test is applied – that is to say, the degree of weight or respect given to the assessment of the primary decisionmaker - depends upon the context. [emphasis added] "whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective." 128. 73.The De Freitas formulation has been applied by the House of Lords and the Supreme Court as a test of proportionality in a number of cases under the Human Rights Act. It was however observed in Huang v Secretary of State for the Home Department[2007] UKHL 11 ;[2007] 2 AC 167 , para 19 that the formulation was derived from the judgment of Dickson CJ in R v Oakes[1986] 1 SCR 103 , and that a further element mentioned in that judgment was the need to balance the interests of society with those of individuals and groups. That, it was said, was an aspect which should never be overlooked or discounted. That this aspect constituted a fourth criterion was noted by Lord Wilson, with whom Lord Phillips and Lord Clarke agreed, in R (Aguilar Quila) v Secretary of State for the Home Department[2011] UKSC 45 ;[2012] 1 AC 621 , para 45. 74. The judgment of Dickson CJ in Oakes provides the clearest and most influential judicial analysis of proportionality within the common law tradition of legal reasoning. Its attraction as a heuristic tool is that, by breaking down an assessment of proportionality into distinct elements, it can clarify different aspects of such an assessment, and make value judgments more explicit. The approach adopted in Oakes can be summarised by saying that it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measure's effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter. The first three of these are the criteria listed by Lord Clyde in De Freitas, and the fourth reflects the additional observation made in Huang. I have formulated the fourth criterion in greater detail than Lord Sumption, but there is no difference of substance. In essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure. … 76. In relation to the fourth criterion, there is a meaningful distinction to be drawn (as was explained by McLachlin CJ in Alberta v Hutterian Brethren of Wilson Colony[2009] 2 SCR 567 , para 76) between the question whether a particular objective is in principle sufficiently important to justify limiting a particular right (step one), and the question whether, having determined that no less drastic means of achieving the objective are available, the impact of the rights infringement is disproportionate to the likely benefits of the impugned measure (step four).”
“137 That passage [the judgment of the ECJ inCase C-331/88 R v. Ministry of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte Fedesa[1990] ECR I-4023 , paragraph [13]] identifies the main aspects of the principles. These are that the measure: (1) must be effective to achieve the legitimate aim in question (appropriate), (2) must be no more onerous than is required to achieve that aim (necessary), (3) must be the least onerous, if there is a choice of equally effective measures, and (4) in any event must not produce adverse effects which are disproportionate to the aim pursued. 138 The first thing to note is that the application of these principles is not an exact science: many questions of judgment and appraisal are likely to arise at each stage of the Commission's consideration of these matters. This is perhaps most obviously the case when it comes to the balancing exercise between the (achievable) aims of the proposed measure on the one side, and any adverse effects it may produce on the other side. In resolving these questions the Commission clearly has a wide margin of appreciation, with the exercise of which a court will be very slow to interfere in an application for judicial review. 139 That margin of appreciation extends to the methodology which the Commission decides to use in order to investigate and estimate the various factors which fall to be considered in a proportionality analysis (and indeed in its determination of the statutory questions of comprehensiveness, reasonableness and practicability)…”
“28 ... [I]t is not every perceived failure in fact-finding or analysis by a decisionmaking body which requires or permits its finding or decision to be quashed. The relevant failing must satisfy a materiality test. Generally speaking, a relevant failing will require the finding or decision to be quashed unless the Tribunal is satisfied that a reasonable decision-maker in the position of the Commission would still have reached the same finding or decision. If a decision-making process which had not included that failing could have led a reasonable decision-maker to a different conclusion, then the relevant finding or decision will usually have to be quashed. 29 This materiality test is of particular importance where a finding or decision is based upon a number of distinct grounds, only one of which is found to have been vitiated. In that context we have found the following passage in the judgment of May LJ in R v. Broadcasting Complaints Commission ex parte Owen[1985] 1 QB 1153 at 1177A-D to be of particular assistance: “Where the reasons given by a statutory body for taking or not taking a particular course of action are not mixed and can clearly be disentangled, but where the court is quite satisfied that even though one reason may be bad in law, nevertheless the statutory body would have reached precisely the same decision on the other valid reasons, this court will not interfere by way of judicial review. In such a case, looked at realistically and with justice, such a decision of such a body ought not to be disturbed. … Another approach to the same problem in such circumstances, which really reflects the same thinking is this: the grant of what may be the appropriate remedies in an application for judicial review is a matter for the discretion of this court. Where one is satisfied that although a reason relied on by a statutory body may not properly be described as insubstantial, nevertheless even without it the statutory body would have been bound to come to precisely the same conclusion on valid grounds, then it would be wrong for this court to exercise its discretion to strike down, in one way or another, that body's conclusion.”