It's true that the ANO does not distinguish between crew and "passengers", but since the CAA has not formally asked for any exemptions to JAR OPS (as far as I am aware), I would suggest that JAR OPS should take precedence (but don't quote me in court!). Flights with observers only are indeed "private" flights, but if you charge between forces, there needs to be some formal structure. That was the original reason for the PAOC system I believe.
WPD works for other electricity companies, but they are at least in the same group (loosely!) so only about 1% of the flights are public transport. They would be better off without an AOC.
Phil