TIDMDRX TIDM82HZ
RNS Number : 6011M
OFGEM
13 January 2023
Drax Pumped Storage Limited pays GBP6.12 million for breaching
Generation Licence
-- Energy generator, Drax Pumped Storage Limited, has admitted
to an inadvertent breach of its Electricity Generation Licence
after securing excessive Balancing Mechanism (BM) payments from
National Grid ESO in relation to Cruachan Power Station
-- Drax Pumped Storage Limited has assured energy regulator,
Ofgem, that it has revised the way it calculates its pricing, to
prevent this from happening again
-- The generator has agreed to pay GBP6.12 million into a Voluntary Energy Redress Fund
Electricity generator, Drax Pumped Storage Limited (Drax), has
today (Friday 13 January) agreed to pay GBP6.12 million into the
Voluntary Energy Redress Fund, after it admitted to inadvertently
breaching a condition of its Generation Licence. Drax secured
excessive Balancing Mechanism (BM) payments from National Grid
Electricity System Operator (NGESO), during periods of what is
known as 'transmission constraint.'
In order to meet our electricity needs, power generated from
coal, gas, hydro, nuclear, wind, solar and other sources of energy
has to get from where it is produced to where it is needed. If the
system is unable to flow electricity in the way required, NGESO
take actions in the market to increase and decrease the amount of
electricity at different locations on the network, often referred
to as 'transmission constraint management'.
Situations which could cause transmission constraints might, for
example, include where there is insufficient network capacity to
transport power out of a particular area in which local generation
exceeds demand. This can arise under normal network conditions on a
given day.
In this case, energy generator, Drax:
-- secured excessive payments between 1 January 2019 and 31 July
2022 by submitting excessively expensive bids to turn down its
generation in the BM, and
-- as a result of Ofgem's compliance work, admitted to having
inadvertently breached its Generation Licence, specifically the
Transmission Constraint Licence Condition (TCLC). The TCLC
prohibits generators from being paid, or seeking to be paid, an
excessive amount by NGESO during times of transmission system
constraint.
Cathryn Sc ott, Director of Enforcement and Emerging Issues at
Ofgem said:
"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."
In the period since Ofgem raised the matter, Drax has fully
cooperated with Ofgem . Drax has proactively sought to rectify the
matter, including agreeing to make a payment to the redress fund
and assuring Ofgem that it has implemented a new cost-based pricing
methodology designed to reflect the costs and benefits to Drax of
curtailing its generation.
Ofgem has now closed this issue, and the GBP6.12 million will be
paid into the Voluntary Energy Redress Fund, which will be driven
directly into supporting vulnerable consumers with their energy, as
well as invest in innovation projects and carbon emission
reductions.
This is part of the compliance work undertaken by the Ofgem to
ensure that the market is fair for everyone. Ofgem expects
licensees to be fully aware of their legal obligations (including
compliance with the TCLC) and have adequate procedures in place to
prevent breaches from occurring.
Notes to Editors:
The Balancing Mechanism is operated by NGESO to ensure that the
electricity transmission system is kept in balance at all times.
Generators can submit offer prices to turn up generation, or bid
prices to turn down generation, and are selected on a competitive
basis by the NGESO according to the system need.
Bid prices are the amount a generator is willing to pay (if
positive) or be paid (if negative) by NGESO in the BM to turn down
its generation when needed to help balance the transmission system.
When turned down, the station can still sell power as if it were
generating. During the period of the breach, Drax submitted
excessively expensive bids to turn down its Cruachan Power Station
in periods of transmission constraint.
TCLC is Condition 20A. Transmission Constraint Licence Condition
of the Generation Licence.
Generators located behind transmission constraints can have
temporary market power during constraint periods because NGESO
requires them to turn down in order to balance the system.
A Transmission Constraint is defined in Condition 20A as any
limit on the ability of the National Electricity Transmission
System, or any part of it, to transmit the power supplied onto the
National Electricity Transmission System to the location where the
demand for that power is situated
The Energy Redress Fund provides money to charities to deliver
energy related projects that support energy consumers in vulnerable
situations. It also helps to deliver benefits to consumers, who
were negatively impacted by the specific issue that triggered the
redress payment. For more information about Ofgem's Voluntary
Redress Fund, see: Ofgem appoints Energy Saving Trust to distribute
payments from rule-breaking energy companies to charities.
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END
IRSVLLFFXFLEBBZ
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January 13, 2023 04:00 ET (09:00 GMT)
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