Renewables generator Drax has admitted breaches of its licence in relation to unjustified Balancing Mechanism claims made during repeated periods of grid constraint.
Implying today that an accounting glitch lasting three and a half years was “inadvertent”, the group’s Pumped Storage entity today said it will pay £6.12 million into Ofgem’s voluntary redress fund.
Drax’s Cruachan pumped hydro plant, the group’s 440MW “hollow mountain” in Argyll, is the focus of the admitted excess BM claims.
Between January 2019 and last July, the generator unjustifiably sought re-imbursement from National Grid ESO for withholding or turning down output from the plant’s four turbines, at times when the grid operator signalled “transmission constraint”.
NG ESO manages “transmission constraint” among generators for all periods when electricity demand and potential supply appear likely no longer to match. Causes might include localised maintenance or storms closing down transmission capacity away from a power plant.
Informed by the grid operator, generators can submit offer prices to turn up generation, or bid prices to turn it down. NGESO selects the bids on a competitive basis, according to prevailing needs on the nation’s system.
The supply licence which Ofgem grants to accredited generators includes a clause enforcing NG-ESO’s rights to manage such bottlenecks. Condition 20A prohibits generators from being paid, or seeking to be paid, an excessive amount by NGESO during such periods.
The regulator’s enforcement director Cathryn Scott said today: “Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users.
“This enforcement action sends a strong signal to all generators that they cannot obtain or seek to obtain excessive benefits during transmission constraint periods. If they do, we have the powers to intervene and we are ready to use them”.
Since Ofgem raised the problem, Drax has worked with the regulator to set it right. It has brought in new cost-based pricing rules, designed to reflect the costs and benefits to Drax of curtailing its generation.
Drax’s £6.12 million will be paid into the Voluntary Energy Redress Fund which Ofgem runs for the industry. It provides support for vulnerable consumers, as well as fostering innovation projects and steps to cut carbon emissions.