Wrigleys Solicitors LLP                            CEN0012

Written evidence from Wrigleys Solicitors LLP

Introduction

Wrigleys Solicitors LLP is a specialist law firm for the social economy and private client.  The Head of the Charity and Social Economy Team has been an in-house solicitor for the worker co-operative federation ICOM in the 1980's and was the solicitor who worked with the Swedish wind farm developers to develop Baywind, the first co-operatively owned wind farm near Ulverston in Cumbria in 1996.  Wrigleys have worked with many co-operatively and community owned wind farms since that date and are keen to support the continued growth of the sector.

Call for evidence questions

1.      What contribution could community energy (through renewable power and/or energy efficiency) make to achieving net-zero by 2050 in the energy sector and its potential role in decarbonising the heat and transport sectors?

1.1              Community energy is vital to achieving net-zero as the transition to net-zero will require local innovation in energy supply and demand.  Involving local people and communities in the development of the energy sector in their area helps to solve multiple problems at once, including the provision of zero emission energy, tackling fuel poverty, funnelling resources back into the community and raising awareness and engagement about climate change.

1.2              Community energy requires the ability to scale better and this is currently being hampered by the lack of Government support.

2.                  How well are the financial and technical needs of setting up and running community energy projects met by existing Government support mechanisms?  What changes would be needed to the access or nature of support to develop community energy further?

2.1              A major difficulty for co-operatively and community owned wind farms is the position taken by the Mutuals Public Registry at the Financial Conduct Authority (“the Registry”) towards its registration function which differs from civil servant to civil servant over the decades.   Up to around 2014 the Registry had a reasonably light touch regime to its interpretation of what is or was not a co-operative and community benefit society.  After consultation it issued new guidance which has taken a much more limited regulatory approach as to what is or is not a co-operative or community benefit society. 

2.2              The Registry recognises that co-operatives should be established on the basis of the Co-operative Principles issued by the International Co-operative Alliance (ICA).  The Chair of the ICA's Principles Committee issued a Guidance Note in 2014 on the Principles where he stated: "the Principles are not inscribed in stone, nor are they rigid rules to be followed; they are the sound ethical principles to be applied with vision and proportionately according to the national economic, cultural, social, legal and regulatory context and particularities within which each co-operative enterprise operates".[1]

2.3              Unfortunately, the Registry has taken the approach which has little vision and leans towards the Principles being rigid rules to be followed.  The effect of this is that it does not consider that co-operatively owned wind farms or solar farms are really co-operatives notwithstanding that their members vote democratically on a one member one vote basis and seek to follow the co-operative principles in their activities.

2.4              A comparison would be for Companies House to indicate a company should not be a registered as a company because it was not following the principles set out in the code of corporate governance for companies.[2]

2.5              The Registry also considers co-operatives as financial vehicles rather than a co-operative satisfying economic, social and cultural needs and aspirations.  There is a prohibition on co-operatives being financial vehicles introduced by HM Treasury in 1938 after a misuse of this legal form.  The Registry appears unable to make a distinction between the type of conduct exhibited by regulated non-co-operative companies such as London Capital and Finance involved in fraudulent activity, which we suggest the legislation on Co-operative and Community Benefit Societies is intended to prevent and a co-operative which has built or purchased a wind or solar farm.

2.6              The effect of this is that the Registry has threatened the cancellation of co-operative status for some democratically run co-operative wind farms which has caused unnecessary expense in responding to the approach of the Registry.   Compare this approach with what appears to be the Registry's approach to the use of the word "co-operative" by the Co-operative Bank, which is owned by hedge funds, where it appears to advise Companies House that theirs is an acceptable use of the name.  It is acknowledged that there is a co-operative of Co-operative Bank customers and the Co-operative Bank still retains an ethical policy.

2.7              A further problem with the regulatory approach of the Registry is their interpretation of Section 23 of the Co-operative and Community Benefit Societies Act 2014 Act (“the Act”) relating to how societies may amend their rules.  The Act  permits amendments provided that are not otherwise unlawful.  When the Registry is presented with amendments which would be permissible for a company it suggests that such amendments would be unlawful for a co-operative.  This matters because co-operative energy farms which are seeking large investments may require transferable share capital.   The Registry will not permit the redemption of this share capital in a manner which is not unlawful for a company.  This suggests either an incorrect interpretation of the law by the Registry or a failure to update the Act by HM Treasury.[3]

3.                  What are the main barriers to development of new community energy schemes under the current regulatory regime?  Do lack of connection or high access charges to the electricity grid pose an obstacle?  How could these be overcome?

3.1              No response provided.

4.                  What role should Ofgem play in supporting community energy and resolving regulatory issues, such as decentralisation and incorporating community energy projects into smart electricity grids?

4.1              Ofgem should have decarbonisation and social benefit form part of the official mandate received from the Government.

4.2              There is a need to identify and fully resource (from the Government and Ofgem itself) an approach to Local Area Energy Planning that sets out a core role for community energy groups.

5.                  What role can local authorities play in developing community energy, for example in planning, decision making and the availability of sites for energy generation?

5.1              The role of local authorities and their relationship with community energy groups is absolutely vital to moving forward with decarbonising the country as a whole.  It is the local authorises that community energy groups have to deal with on many aspects of their projects, as the local authorities control a large portion of the services, local development and infrastructure which surround a project.

5.2              We are encouraged by the number of local authorities which have set goals to become net zero ahead of 2050 but currently these goals are not supported by training or sufficient knowledge within the local authority and therefore progress against meeting the objectives is difficult. 

5.3              A greater emphasis on skilling up members of the local authority would greatly assist and would help in generating engagement and collaboration between the local authority and local community energy groups, which can have a lot to offer in terms of advice and engagement with the population.

5.4              A push towards having local authorities identify suitable sites for community energy development and assistance with planning permissions, including developing local planning guideline, would be helpful.

March 2021