Centrica wins high court challenge against price cap

British Gas owner Centrica has won its legal challenge against the way energy regulator Ofgem calculates the default price cap.

The case, which was backed by other large suppliers, disputed the way the regulator calculated wholesale costs for the first three months of the cap – between January and March. Ofgem initially consulted on basing the cap on forward contracts between April and September but in its final consultation the calculations were instead based on the February to July period. Centrica claims it lost £70 million in the first quarter of the year as a result of the decision.

Mrs Justice Andrews, ruled that Centrica was “entitled to the declaratory relief that it has sought”.

A Centrica spokesperson said: “We welcome the judgment of the court regarding the treatment of wholesale costs that energy suppliers incur to serve their customers, and the court’s assessment of the wholesale costs applicable to the first period of the energy default tariff cap.

“This outcome underlines the importance of transparent and rigorous regulatory processes to ensure well-designed regulation that is in the interest of a well-functioning energy market, which in turn allows participants to operate with confidence and ultimately benefits all energy consumers.

“We look forward to continuing to work closely with the government and the regulator on the development of future policy and we remain committed to delivering for our customers’ changing needs, including through our involvement in the transition to a lower carbon future.”

An Ofgem spokesperson said: “We are disappointed by the High Court’s judgment. Our overarching objective was to set the cap at a level that protected consumers.

“The judgement does not change the fundamentals of the price cap, which remains in place and will continue to protect 11 million households on default deals, ensuring that they pay a fair price for their energy.

“We are considering our next steps in light of the judgment.”