Energy Update 4 June 2013
Welcome to this edition of Fieldfisher's Energy Update. The last couple of weeks in the sector has seen the European Commission spring surprise inspections on several companies in the sector, reform of the UK competition regime and an Ofgem consultation on the proposed scope and review of a review of interest during construction (IDC) for the offshore transmission and interconnector regulatory regime. In addition a report has been issued by the UK government's Climate Change Committee on the future electricity market.
EC energy price-fixing probe
The European Commission has begun an investigation into the possible manipulation of energy price benchmarks. Several companies in the energy sector had surprise inspections carried out by the European Commission for alleged infringement of European antitrust law, namely the manipulation of the reference price for oil and bio fuel products. This investigation will most likely have very significant implications for the whole oil industry and its customers as well as the any banks, trading houses, utilities or major users who buy oil products or trade oil based commodities. The effects of the investigation will not be limited to Europe.
Decisions taken in the early stages of a cartel investigation or immediately upon discovering evidence of wrongdoing can have very significant consequences. The cost of non-compliance including financial penalties, litigation, reputational damage, and unenforceable agreements can be so great that identifying and assessing competition compliance risk factors is business critical. Please consider if you have contacts in your company or clients that might be interested in our services. We have excellent competition law and energy teams in Europe and the US that can address any issues your company or clients may have in this context.
For more information click here
Reform of the UK Competition Regime – The competition provisions of the Enterprise and Regulatory Reform Act
The Enterprise and Regulatory Reform Bill received Royal Assent on 25 April 2013. The changes brought on by the Enterprise and Regulatory Reform Act (the "Act") are wide ranging. It is possibly the single most substantive reform of UK's competition regime. The Act is expected to fully come into force by April 2014.
For our article summarising the reform please click here
Ofgem consults on the review of interest during construction for interconnectors and offshore electricity transmission and interconnectors
On 24 May 2013, Ofgem issued a consultation on the proposed scope and review of a review of interest during construction (IDC) for the offshore transmission and interconnector regulatory regime.
IDC is the allowance for the cost of financing the development and construction of electricity transmission assets. An allowance, in the form of an explicit or implicit rate, is provided for IDC by Ofgem in all three electricity transmission regulatory regimes: offshore transmission, regulated electricity interconnectors and onshore transmission.
For more information click here
How to save £100 billion
Chaired by Lord Debden, the UK government's Climate Change Committee has reported on future electricity market reform. A key message is that energy from wind farms, nuclear power and other greener energy sources may be costly in the short term but could save the country up to £100 billion in the long run. The report also recommends the introduction of long-term contracts, providing revenue certainty for low-carbon projects and which would be essential in making them financially viable.
For the full text of the report click here
Fieldfisher obtains positive ECJ opinion for RWE Essent in Brussels
Our Brussels Energy team has recently obtained a positive opinion from the Advocate-General at the European Court of Justice (ECJ) for RWE Essent in a case relating to the circulation of electricity guarantees of origin and green certificates. Advocate-General Yves Bot has ruled that regulators' decisions that refuse to accept guarantees of origin from other European Union (EU) member states for a quota obligation violate the principles of free circulation of goods within the EU. It will depend on the ECJ's final decision as to how this opinion will affect the European trade of green certificates and guarantees of origin.
For further information please contact Energy Regulatory partner David Haverbeke
Fieldfisher attends All Party Parliamentary Group for Unconventional Gas & Oil (APPG)
Fieldfisher attended the inaugural meeting of this APPG, a government established advisory panel on all aspects of unconventional oil and gas exploration, development and potential impact. The meeting was chaired by Dan Byles (MP) and there was a speech by Michael Fallon (MP) a minister at the Department for Energy and Climate Change (DECC).
The Government's message is that it is creating the framework to accelerate shale gas development in a responsible way. The Government's view is that fracking can resume with robust regulation in place and there is nothing stopping licensees from bringing on new exploration plans and engaging with local communities. The British Geological Survey is currently examining whether the geological formations we have in the UK, which are similar to those in the US contain similar shale gas reserves to the US.
For more information on the APPG please click here
Is "Good faith" implied into English law commercial contracts in the energy sector?
A recent decision of the High Court seems to show a thawing of the traditional reluctance of English courts to imply "good faith" as a term in commercial contracts. In Yam Seng Pte Ltd v International Trade Corp Ltd (2013) EWHC 111 (QB) a term of good faith and fair dealing based on the presumed intention of the parties was implied into a distributorship agreement for “Manchester United” fragrances and products.
While not a case focusing on the energy sector, the case has wide spread implications. Many of those in the energy sector deal under English law contracts in overseas jurisdictions and this case therefore shows a softening of approach which brings English law more into line with the approach already adopted in the civil code systems of much of Europe.
To view the full text of the judgment (see particular paragraphs 119 to 154) please click here