European Court decision that saw Capacity Market suspended for a year over State Aid clearance was wrong, says appeal judge

The European Court was wrong to uphold a challenge to the UK’s Capacity Market brought by Tempus, according to a new opinion on an appeal brought by the UK and the European Commission (along with Poland).
In the original decision, the court agreed with Tempus that the EC should have undertaken an in-depth examination of the Capacity Market to ensure it passed State Aid tests, instead of giving it a pass after a preliminary examination. That decision saw the CM suspended for nearly a year between November 2018 and October 2019 while the Commission re-examined the market, with resulting cash flow problems amounting to around a billions pounds that should have been collected by suppliers and passed to CM participants. In the event various business and domestic suppliers took different decisions on whether to collect the payments and hold them in a separate account while waiting for the judgement. When the EC’s second investigation again said the CM passed State Aid tests the Low Carbon Contracts Company, the CM counterparty, billed suppliers on 14 November for £1.17 billion in ‘catch-up’ payments due within five working days.
The new opinion clarifies an issue around the information required to clear State Aid barriers, according to a blog post from, Gordon Downie, a partner at Shepherd and Wedderburn, who said that in the context of a preliminary investigation, the Commission can relying on the information provided by the Member State concerned and is obliged only to take evidence from a third party into account, “not to go beyond the examination of the facts and points of law brought to its attention by the third party” (see post here)

Tempus took action because it said the Capacity Market disadvantaged demand side response (DSR). The judge also considers a second plea from Tempus that formed part of the company’s original challenge but was not considered in the first judgement, because the court had already ruled for suspension. The second plea is over several specific aspects of the Capacity Market’s treatment of DSR, for example the fact that it could only bid for one-year contracts, in contrast to new power generation which could seek 15-year contracts. The judge said that restriction was in respect of the lower costs involved in setting up DSR, which it said Tempus had not disputed.

Read the full opinion here

Further reading
Capacity Market ‘standstill’ payments short by £38 million
What has the Capacity Market ever done for us?
Sara Bell: Capacity Market failings are substantive

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