UK: New Right of Appeal Against Decisions by GEMA

The new appeals process has beneficial implications for those operating within the energy industry - generators, network businesses and suppliers - and may also have a wider significance for companies which actively manage their purchase of energy and are signatories to the designated agreements and codes.

Although trailed for a couple of years, the Order (the Electricity and Gas Appeals (Designation and Exclusion) Order 2005) which introduces the new appeals process and achieves this enhanced regulatory accountability only comes into effect this week.

The new right of appeal stems from an initial Department of Trade and Industry consultation in April 2003 entitled "Strengthening the transparency and accountability of the gas and electricity industry code modification process" which revealed widespread concern about the accountability of GEMA's decision-making process in relation to certain code modifications.

Prior to the change, the only means market participants had of appealing GEMA's decisions was to initiate a judicial review. As well as being expensive and time consuming, the judicial review route was thought to be of little value to market participants as the courts were thought to be unwilling to question the quality of a regulator's decision or require evidence underpinning the decision to be examined. The change in law now means there is a right of appeal to decisions made by GEMA relating to the designated codes and agreements being: in electricity the Balancing and Settlement Code (BSC), the Connection and Use of System Code (CUSC) and the Master Registration Agreement (MRA); and in gas the Uniform Network Code and associated short form Network Codes and the Supply Point Administration Agreement (SPAA).

The enacting Order sets out a number of circumstances where a decision by GEMA cannot be appealed, even though it relates to one of the designated documents. The exact exclusion differs depending on the actual code or agreement. In general, under the new procedure, it will not be possible to appeal to the Competition Commission where GEMA agrees with the recommendation of the majority of the body submitting an amendment to the code or agreement. GEMA may also exclude the right to appeal where the holding of an appeal is likely to have a material adverse effect on the availability of electricity or gas for meeting reasonable demands of consumers of Great Britain.

However, overall the new rights should provide more of a balance between the interests of market participants and the actions of GEMA and enhance regulatory accountability while reducing regulatory uncertainty.

The new right of appeal is contained in sections 173 - 177 and Schedule 22 of the Energy Act 2004 which became effective following the designation by the Secretary of State of various industry codes and agreements to which the right applies and the setting of various exclusions to the right of appeal in the Electricity and Gas Appeals (Designation and Exclusion) Order 2005, S.I. 2005 No. 1646 (the Order).