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Operations & Assets Market view Changes to wayleaves New procedures now apply to necessary wayleave applications, which improves the system, but an opportunity for more radical change has been missed, says David Feist. W hen Distribution Network Operators (DNOs) and Transmission Network Operators (TNOs) need to install new or retain existing transmission or distribution lines over land they do not own, and this cannot be secured by voluntary agreement, they can seek a necessary (compulsory) wayleave from the secretary of state. For existing power lines, a wayleave agreement can terminate by the passage of time, or by the landowner serving notice, or if by virtue of a change in ownership it is no longer binding. Landowners will often seek removal of overhead electricity lines, for example when they have planning permission to carry out development and the apparatus is a constraint on possible development. When a wayleave is terminated, the landowner can go on to serve "notice to remove". A well-advised network company should then take action because legal time limits apply, as set out in Schedule 4 of the Electricity Act 1989. The Act says that if no application for a necessary wayleave is made within three months of the notice to remove "the licence holder shall comply with the notice at the end of that period". If an application is made it safeguards the TNO's or DNO's position but triggers an expensive, lengthy (at least 12-18 months is not unusual) and often cumbersome process. The rules, until reformed, dated from 1967. Network companies have statutory obligations to provide efficient and reliable electricity networks and, as most people will appreciate, removing or relocating overhead electricity lines is far from straightforward. Therefore the DNO/TNO can obtain a necessary wayleave if it can prove it is "necessary and expedient" for the apparatus to stay where it is. The process requires TNOs and DNOs to prepare extensive technical evidence. If it goes all the way, the process culminates in a final hearing before an inspector from the Department of Energy and Climate Change (Decc), similar to (although distinct from) a court hearing or planning inquiry. Even when successful, DNOs and TNOs cannot recover their costs from the landowner, who is not obliged to attend the final hearing no matter how vociferously they have opposed the retention of the electricity line in question. If the necessary wayleave (maximum length is 15 years) is granted by the secretary of state, the landowner can then go to the Upper Tribunal (Lands Chamber) to claim compensation based on compulsory purchase order principles. While the secretary of state has no power to decide on compensation, the commercial reality is that many necessary wayleave applications are made because of unresolved financial disputes between landowners and DNOs/TNOs regarding compensation or the diversion of the line, with property development aspirations by the landowner normally featuring heavily. Most necessary wayleave applications and the compensation claims that sit behind them are resolved via agreement. However, the negotiations take place against the backdrop of statutory powers for the licence holder if they can satisfy the test, the potential compensation gain for the landowner, and the cost and feasibility of a diversion by the DNOs/TNOs. While only a small number go to a final hearing, a significant number get quite close and cost and management time is considerable. So what has changed? In October 2012 Decc began a consultation on proposed changes to the procedures for necessary wayleave applications, to try and modernise the process. A number of the responses indicated support for: (i) hearings to be streamlined through the introduction of a written representations procedure where parties agree to it, rather than an oral hearing in every case; (ii) a statement of evidence to be provided by both parties; and (iii) the introduction of fees for processing necessary wayleave applications and some changes relating to orders and procedures for tree lopping. New rules, called The Electricity (Necessary Wayleaves and Felling and Lopping of Trees)(Hearing Procedures)(England & Wales) Rules 2013 now replace the 1967 rules. They adopt these changes and various others, and a separate set of regulations brings in a fee charging scale for applicants. Will it make a difference? Time will tell. However, the primary legislation and the overall structure remain the same. Schedule 4 of the Electricity Act 1989 has not been amended by these changes. The new procedures will apply only to applications made after 1 October 2013, so a significant number of applications which await the appointment of an inspector (they are in short supply) and the listing of a hearing will not gain from any benefits. Moreover, Decc rejected the suggestion of a code of practice for negotiations between landowners and licence holders, which is a disappointment to some involved in the process. The standard response from Decc to suggestions that landowners be compelled to attend hearings was that the secretary of state was unable to compel attendance, which some will see as a bit of a fudge. Significantly, no power for the secretary to award costs for or against either party has been introduced. Courts have that power and use it to address issues such as unreasonable conduct during the court process but it is clear that landowners and their agents were against it and Decc was uncomfortable with it. However, that contrasts sharply with planning appeals where there are quite wideranging cost provisions where there is unreasonable behaviour. So some may find this reluctance puzzling. Overall, it is a fairly light touch in terms of reform. It seems Decc did not want to go near anything that would require a change to primary legislation. The introduction of a written submission procedure is a good idea, because clearly there are cases where an oral hearing is overkill. However, on significant applications one can imagine one of the parties seeking the security of being able to present their case in detail, through an advocate, and test the evidence. It seems unlikely necessary wayleaves applications are going to become a fast-track procedure as a result of these reforms. David Feist, real estate litigation partner at global law firm Eversheds LLP UTILITY WEEK | 10th - 16th January 2014 | 23