Drax fined £6m after charging National Grid excessive prices to cut energy
Power group Drax has agreed to pay the energy watchdog Ofgem a hefty £6m-plus fine, after it admitted to an ‘inadvertent breach’ of its electricity generation licence.
The power group’s pumped storage subsidiary will cough up £6.12m after charging the National Grid’s electricity system operator (NGESO) excessive prices to cut its power generation.
The payments are linked to its Cruachan Power Station and the UK’s balancing mechanism.
The money will go into the Voluntary Energy Redress Fund – which goes towards packages to support vulnerable households alongside new green energy projects and carbon emission reductions.
Ofgem has revealed Drax Pumped Storage Limited secured ‘excessive payments’ over a three-and-a-half year period between January 2019 and July 2022 by submitting extremely expensive bids to turn down its generation in the balancing mechanism.
Following Ofgem’s compliance work, Drax conceded it had inadvertently breached its generation licence – specifically the transmission constraint licence condition.
This prohibits generators from being paid, or seeking to be paid, an excessive amount by NGESO during times of transmission constraints in the energy network.
Drax has assured Ofgem it has now revised the way it calculates its pricing, to prevent this from happening again.
This includes a new cost-based pricing methodology designed to reflect the costs and benefits to Drax of curtailing its generation.
When approached for comment, Drax spokesperson said: “Drax takes its responsibilities under the terms of its generation licence very seriously and co-operated fully with Ofgem in order to resolve this issue relating to its operations at Cruachan pumped storage power station in Scotland. We have put measures in place that are designed to prevent this from happening again.”
Cathryn Scott, director of enforcement and emerging issues at Ofgem said: “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.”
Ofgem has been highly active with fines recently for suppliers, and recently made Utilita agree to pay £830,000 after it uncovered failures in customer support