Shannon LNG, the developer of a planned liquefied natural gas facility in north Co Kerry, has been granted a short-term High Court order restraining the enforcement of a potential fine of over €7 million against it.
Ms Justice Mary Rose Gearty granted the temporary stay on the enforcement of the fine in the judicial review proceedings brought by Shannon LNG Ltd against the Commission for Regulation of Utilities (CRU) and EirGrid plc, the national grid operator.
Shannon LNG wants the court to quash a decision of CRU refusing to postpone a requirement for the energy provider to post an increased “performance security”. This is a surety to cover penalty charges incurred in the event Shannon LNG’s contract with EirGrid is terminated.
According to its court documents, Shannon LNG currently faces a requirement to pay its current surety of €7,064,000 to EirGrid, arising from the circumstances of the dispute.
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In May 2023, EirGrid, along with its Northern Ireland counterpart SONI Ltd, awarded Shannon LNG a “capacity” contract to provide energy to the grid when required via two 200 megawatt gas-fired generators.
Under the system whereby private generating companies like Shannon LNG sell the power they produce to the grid, an online auction, involving sealed bids, is held four years in advance.
EirGrid and SONI administer what is known as the “capacity market code” which makes provision for arrangements to secure generation adequacy and capacity to meet the demands of consumers.
Under this code, suppliers who are awarded capacity contracts must put up a performance security.
A dispute arose when, in August this year, EirGrid sought from Shannon LNG performance security amounting to €10,596,000, arising from an increase in rates used to calculate the surety.
Shannon LNG had previously provided security amounting to €7,064,000, and according to its court documents, is committed to doing so until at least September 2026.
In May 2024, Shannon LNG asked the Single Electricity Market Committee (SEMC), a body acting on behalf of CRU and its northern counterpart, to postpone a requirement to post increased performance security arising from hiked rates, in the event that the committee has granted an extension for the delivery of energy capacity – in Shannon LNG’s case, the delivery of the gas-fired generators – due to delays caused by planning permission appeals or judicial reviews.
Planning permission granted to Shannon LNG for the two gas-fired generators is the subject of an ongoing legal challenge brought by Friends of the Irish Environment. It is due to be heard in February next year.
The request for postponement was refused by SEMC. A second, similar request by Shannon LNG was refused in August. This decision is the subject of Shannon LNG’s judicial review challenge.
Earlier this month, EirGrid indicated it would take “enforcement steps” against Shannon LNG, after it alleged defaulted on its contract with EirGrid. This arose from Shannon LNG’s refusal to post the increased surety, requested in August.
According to Shannon LNG, this enforcement action will require payment of the €7,064,000 performance security to EirGrid.
Shannon LNG argues that it has been treated differently to other energy providers, who were awarded capacity contracts in certain auctions, and were afforded postponements following modifications of the “capacity market code”.
Shannon LNG contends that its surety should remain at €7,064,000 until either the determination of its case against CRU and EirGrid; the determination of FIE’s challenge to permission granted for gas-fired generators; or permission is granted by An Coimisúin Pleanála for its power plant in Co Kerry.
Last week, following an application moved by Neil Steen SC appearing for Shannon LNG, Ms Justice Gearty granted a short term order restraining EirGrid from calling on the €7,064,000 surety. The case returns next month.
