On 11 November 2022 Mr Justice Zacaroli handed down judgment (available here) in respect of applications for directions by the office-holders of 10 failed energy suppliers.

The judgment is the first to consider whether Ofgem is entitled to prove in respect of failed suppliers’ obligations to provide renewables obligation certificates or to make a buy-out payment. In this regard, the judgment further appraised whether such obligations were discharged as a result of a process of mutualisation whereby renewables obligation shortfalls were recovered from wholly or partially compliant suppliers.

The applications also raised the question whether suppliers of last resort (SoLRs) could prove in the failed suppliers’ estates for the cost of honouring credit balances of customers that they took on. Related to this was the issue whether the SoLRs’ honouring of customer credit balances discharged the obligations customers were owed by the failed suppliers.

The resolution of these issues was relevant to multimillion pound proofs of debt lodged by Ofgem and the various SoLRs in the failed suppliers’ estates. Alongside novel issues of statutory construction arising in respect of the renewables obligation issues, the SoLR claims involved consideration of numerous aspects of the law of unjust enrichment, including whether any enrichment of the failed suppliers occurred at the SoLRs expense in circumstances where SoLRs received a last resort supply payment in respect of the costs of honouring credit balances, and had also submitted competitive bids to be appointed. The application also provided an opportunity to test whether English law recognises a defence of passing on.

Zacaroli J ultimately concluded that the failed suppliers’ obligations owed to customers in respect of credit balances were discharged, and that, in principle, both Ofgem and the SoLRs had viable claims.  

Lance Ashworth KC and Matthew Morrison acted for the office-holders of Iresa Limited (in administration) and Economy Energy Trading Limited (in liquidation), two of the failed suppliers applying for directions. They were instructed by Tim Speed of Shakespeare Martineau LLP (Iresa) and Devinder Singh of Squire Patton Boggs (UK) LLP (Economy).