Energy ministry D-BEIS and Chancellor Jeremy Hunt face a legal threat this morning from a £2 billion investor and builder of 1.5GWp of wind capacity, over the Treasury’s alleged ‘smash and grab’ imminent seizure of clean generators’ earnings.
Community Windpower has hired lawyers including top solicitors Mischon de Rea as it strives to force a government rethink of the new Electricity Generator Levy, set from January 1 to seize cash from bigger makers of green power.
The government’s release of the EGL’s details last Tuesday, the day that Parliament rose for its three-week Christmas break, sparked immediate outrage from green generation lobbyists the REA.
Now Community Windpower’s advisers have written to government lawyers, warning them of a challenge in the courts, should ministers press ahead with the levy.
Set to begin on 1 January and run for five years until March 2028, the EGL is an imminent 45% Treasury grab on so-called “exceptional receipts” accruing to generators of electricity traded on wholesale markets.
The EGL defines ”exceptional receipts” as cash from wholesale electricity sales made at an average of £75 per MWh or higher over any accounting period. Any green generator outputting 50GWh or more in a year is liable, on all sales beyond a threshold of £10 million.
All power generators have seen their revenues soar, on the back of two years of rising prices for natural gas, made worse by Putin’s violation of Ukraine in February. The government intends the EGL to raise funds supporting households and businesses facing rocketing UK retail costs, already among Europe’s highest.
Legal submissions made today after advice from barristers David Blundell KC and Yaaser Vanderman of Landmark Chambers describe the levy as “unfairly disproportionate, discriminatory and adverse to the Government’s Net Zero Strategy”.
Generators relying on hydrocarbons are also making their own supernormal profits, but these are out of the EGL’s remit. That’s a clear sign, Community Windpower’s lawyers argue, that Britain’s government is favouring fossil fuel generators over their clean power rivals, thereby deterring investors in the growing sector.
Community Windpower agrees in principle a levy is needed to raise funds for the government’s relief of consumer pain. But, along with representatives of other green generators, it disputes the EGL’s poor design. Fossil-fuelled businesses’ operating models already run counter to Britain’s net zero ambitions, lawyers for the clean power firm contend, yet escape the EGL’s strictures.
The turbine operator’s lawyers question too Whitehall’s unexplained decision to hit only the larger generators, allowing smaller ones to avoid the cash swoop.
The wind developer’s papers cite conflicts with existing obligations on ministers, including laws requiring the government to cut carbon emissions and to promote alternative energy sources.
Mischon de Rea today fired a warning shot, announcing their intention to prepare proceedings early in the New Year, with a view to delivering a writ straight after the Budget on March 15.
That event could open a parliamentary route for Chancellor Jeremy Hunt to re-think the EGL and save face. Though the levy is intended become effective next week, it still needs Parliament’s rubber-stamp in votes on the Finance Bill, so that it enjoys legal force.
Community Windpower’s managing director Rod Wood said today:
“Voters will find it frankly bizarre that the government is bringing in a levy that will deliberately penalise renewable energy firms like ours, while at the same time leaving the gargantuan profits of the fossil fuel electricity generator sectors untouched.
“It’s a smash and grab raid on renewables that will pull the rug out from under the UK’s efforts to cut carbon, cut consumer bills and bring on energy security.
Unleash the dogs of law
“This is especially the case”, Wood went on, “given new research from the UK’s renewable energy and nuclear trade associations which demonstrates over half of Britain’s electricity demand was met by low carbon power generated over the period from October to December. That saved consumers an estimated £5.7 billion by avoiding the need for gas imports.”
Wood said: “This measure not only leaves Ministers’ green credentials in shreds, it will also suck hundreds of millions of pounds out of investment in green energy, hammering renewable industries and costing high quality jobs.”
“Legal action is a last resort, “ added the wind generator’s boss. “But the levy proposals quietly slipped out ahead of Christmas are worse than we feared.
“Despite forceful representations made directly to Government over the past two months, Ministers have remained immune to reason.
Mishcon de Reya partner Alexander Rhodes weighed in: “The way this levy has been designed is completely at odds with the government’s own stated objectives to transition the UK to a net zero economy and develop a secure supply of clean energy.
“This levy cuts across those ambitions, contrary to the Government’s own legislated goals and legal responsibilities. Community Windpower should not have to go to court to force the Government to take its environmental responsibilities seriously”.
“We are now left with no option but to seek the court’s intervention”, said the lawyer.
His firm is best known for acting for Diana, Princess of Wales in her 1996 divorce from Britain’s future King Charles III. It also successfully defended Professor Deborah Lipstadt from historian David Irving’s 2001 libel claim, in relation to her book ‘Denying the Holocaust’.
The energy crisis in the UK arises in part from the outdated algorithm that fixes the consumer electricity price to the twice daily spot price for gas. This is absurd when more than half our electricity is from renewables and nuclear power, but the algorithm was established when most of our electricity was generated by gas fired power stations. As the UK is part of the trans European network of electricity interconnects, our pricing is linked to the European prices. At the peak of the energy prices, the UK domestic price for electricity was almost 3 times the price of gas in kWh. Over the next decade the electricity price needs to be reduced and the gas price raised, but this must be done gradually to allow households to adapt and take measures such as installing ground source heat pumps that are more than 4 times more efficient than the best gas fired condensing boilers in converting their energy source to heat.