Irish High Court quashes regulator’s decision implementing EU clean energy regulation

The judicial review proceedings were brought by Greencoat and Energia to challenge the lawfulness of the decision made by the Irish energy regulator, the CRU, acting through its Single Energy Market Committee (SEM Committee). The energy groups alleged that the regulator’s decision failed to give full effect to Article 13(7) of the EU Clean Energy Package Electricity Regulation, which provides that power-generating companies would receive financial compensation when they are told to reduce their energy output due to grid network limitations or issues.

The challenged decision (44-page PDF/1.3MB) was taken by the SEM Committee in March 2022, when it decided to keep the electricity dispatch systems broadly the same as they had been prior to the regulation, which came into force on 1 January 2020. It planned to take a phased approach to implement fully the regulatory requirements in relation to compensating energy generators who are forced to switch off generation, and to defer financial payments until the 2024-25.

The High Court found that the CRU’s compensation decision is “fundamentally flawed”, as it conflicted with Article 13(7) of the regulation. In reaching its decision, the court stated that it could not find basis in the Regulation for inferring that the regulation permitted implementation to take place over an extended period.

Litigation expert Zara West of Pinsent Masons said: “This judicial review demonstrates the challenge for EU member states of implementing energy-related EU regulations, due to the operation of direct effect and the limited flexibility they can afford.”

The court also clarified that there is nothing in the regulation to support the intention for a national regulator to implement the regulation by introducing a number of policy-based measures, which the SEM Committee did in its decision. The SEM Committee’s compensation system includes measures such as separation of the compensation mechanism in terms of costs associated with lost revenues in the market and revenues associated with foregone government support; and distinguishes between generators according to their date of commissioning based on presumptions as to whether compensation for priority dispatch generators will be considered unjustifiably high or low.

The High Court ultimately concluded that the SEM Committee had “overreached its role as regulator and took a misguided approach to implementing the Regulation”.

“Given that the scope and content of Article 13(7) of the Clean Energy Package Electricity Regulation was clear, it was problematic for the SEM Committee to put in place a compensation system which went beyond that provision,” said West.

The judgment states that while the order sought quashing the CRU decision is warranted, the order requiring the CRU to give full effect to Article 13(7) and the declaratory reliefs sought require input from the parties.

The proceedings were listed for a later date, at which point the parties could inform the court of their views in relation to the final orders to be made.