DfE faces legal threat over schools' energy scheme

The Department for Education is facing the threat of a judicial review over new rules directing trusts towards its schools’ energy-buying scheme.

The Energy Consultants Association (ECA) has written to new education secretary Lucy Powell, saying it is now “actively considering judicial review” over the Energy for Schools programme after the DfE’s position “materially worsened”.

Tes first revealed that the ECA had accused the DfE of making “misleading” claims about the programme and was warning that schools could be pushed into energy contracts that were not right for them.

Now the ECA says the dispute has escalated after wording in the new Academy Trust Handbook states that trusts “must use” the DfE Energy for Schools service or a DfE-approved energy deal “unless an alternative agreement of equivalent value for money has been sourced”.

The association has sent an “open pre-action correspondence” - a formal written exchange before starting a court claim - giving the DfE a final opportunity to resolve the dispute before it considers beginning the formal judicial review process.

DfE energy guidance challenged

In its letter sent to Ms Powell last week, the ECA says the wording of the new Academy Trust Handbook appears to contradict a DfE assurance given to it in July that participation in Energy for Schools had not been mandated.

The association says it had been told by the DfE that schools and trusts remained free to use alternative procurement arrangements, including energy brokers.

But it now argues that the use of the word “must” in the handbook makes the DfE scheme, or other approved deals, the default requirement unless trusts can demonstrate that an alternative offer gives equivalent value for money.

The ECA is asking the DfE to explain the legal basis for the requirement, how trusts should prove “equivalent value for money”, and what happens if they do not comply.

The letter also raises concerns that the wording could unlawfully restrict academy trustees’ ability to make their own decisions and potentially distort competition in energy markets.

Changes to wording

DfE guidance on the energy scheme, part of the government’s Maximising Value for Pupils programme, says it “removes risk associated with unregulated energy brokers”.

The ECA says this description “disparages an entire professional sector” and fails to distinguish between reputable brokers and firms that have behaved poorly.

The association acknowledges that energy brokers are not directly regulated by Ofgem - the energy regulator - but stresses that they must still operate within legal and regulatory constraints.

Tes understands the DfE’s position is that trusts are free to use independent energy brokers where they can demonstrate equivalent or better value for money.

In response to the letter, the DfE said it has removed the reference to “unregulated energy brokers” from its Energy for Schools pages.

It has also changed wording around alternative arrangements from “comparable pricing” to “equivalent value for money”.

But in a new letter sent yesterday, the ECA says these changes do not resolve its main concerns. “A mandate subject to a conditional exception remains a mandate,” it says.

Trusts’ evidence to DfE

The ECA also raises concerns about how trusts are supposed to prove that an alternative arrangement offers equivalent value for money.

It says a school can receive a live, fixed-price offer from a broker but that the DfE scheme does not provide a future energy price before a school joins, as energy is bought gradually over time.

The ECA argues that this leaves trusts having to compare a known price with an unknown future price.

It is asking the DfE to publish a clear methodology showing how trusts should make the comparison and confirm they will be judged using information available at the time of the decision.

‘One-sided’ burden

The ECA also claims that trusts choosing an alternative route face a greater administrative burden than those using a DfE-backed deal.

Trusts using another provider must produce evidence comparing price, terms, service and risk, while trusts using a government-backed route do not face the same requirement, it says.

This is a “one-sided burden”, the association says, asking the DfE to replace the current wording with a requirement for trusts to demonstrate value for money regardless of which route they use.

Complaint to regulator and MPs

The ECA says if the dispute is not resolved with the DfE, it will instruct solicitors to issue a formal “letter before claim”.

The association also says it could complain to the Competition and Markets Authority over the “potential distortion of competition in the schools energy procurement market” and brief the Commons Education Select Committee and MPs.

The ECA remains willing to meet DfE officials and provide evidence without pursuing legal action, it adds.

It has given the DfE 14 days to respond and says its right to pursue judicial review and a CMA complaint remains “expressly reserved”.