Government faces £2.2m action over illegal FIT cuts

Three solar firms have lodged a legal claim for £2.2m in lost earnings from the government following its illegal changes to the solar power feed-in-tariff, with lawyers warning the action could open the flood gates to further claims.

The legal action comes after the government announced in October 2011 that it would slash by half the feed-in-tariff (FIT) for solar power, which is paid to those people that install solar panels on their property for the power generated. The announcement prompted a slump in the industry, with installations falling 97%.

The move was subsequently ruled illegal by the High Court because the 12 December cut off date stipulated by the government was before the government’s consultation on the change had ended.

Now three solar firms have issued a letter before claim to the Department of Energy and Climate Change (DECC) demanding £2.2m in damages.

Building understands further claims may follow, with other law firms acting on behalf of more solar companies.

The three firms say the cut to the FIT rate resulted in the cancellation of substantial installation contracts and multiple rent-a-roof schemes, which see firms paid using the FIT.

Nick Keighley, managing director of Solarlec, one of the firms lodging the claim, said he had been forced to lay off staff as business halved after the 12 December cut-off date.

He said: “I think the industry has been very poorly treated. A lot of people put a lot and a lot of effort in last year to building businesses up just to have that taken away from us. I think the government should be responsible for its actions.”

A spokeswoman for Prospect Law, the legal firm representing the three solar companies - two of which wanted to remain anonymous for commercial reasons - said “significant damage” had been done to the solar industry through the government’s actions.

“Solar may bounce back once consumer confidence returns, but in the meantime we are urging the government to act responsibly and offer compensation,” she said.

Simon Tolson, a senior partner at law firm Fenwick Elliott, who is not involved in the action, said the legal claim could “open the flood gates” for more claims because of the number of small businesses that had been effected.

“It clearly does have legs because the government didn’t complete a consultation process and it didn’t allow industry and individuals the chance to plan,” he said.

Labour’s shadow energy secretary Caroline Flint hit out at the government over the legal action.“Ministers have serious questions to answer about their chaotic mismanagement of the cuts to the feed-in tariff and its disastrous impact on jobs and public confidence in solar power,” she said.

DECC declined to comment.