Ofgem wants answers from electricity system operator (SO) National Grid on why it spent over three times its budget to procure additional contracts with suppliers of a specialist network service – Black Start – for 2016/17. The SO wants to claim £113 million back from customers, because it said the rapid closure of coal plant forced it to buy more services. Ofgem is consulting on whether to allow the change and wants responses by 6 July. Its conclusion – and who pays that bill – will not be known until 24 August.
Black Start is the service that enables the network to be brought back from total shutdown. It generally begins with a small plant, which must be ready and ‘warmed up’, and there must be plant in place for each region.
Ofgem agreed a budget increase for Black Start in 2016/17 in March from £22.35 million to £34.74 million. The regulator said this was “to address the need to procure additional service providers and due to changing market conditions. Traditional Black Start service providers are running increasingly infrequently in the energy market due to low wholesale prices and low spreads.”
But in May National Grid asked for £113 million in extra revenue “to account for the cost of contracting for additional Black Start capability with Drax and Fiddler’s Ferry”. The SO told Ofgem “the costs were caused by the unforeseen announcement of closure or mothballing by a number of thermal power stations in February 2016 due to unfavourable market conditions” and it had been forced to act.
The regulator said it would ask for further evidence from the System Operator on why it could not have foreseen the closure or mothballing of these stations, as well as justification for choosing these providers, and details of the SO’s contingency planning. It promised to publish that information but said, “we have chosen to publish this consultation alongside the notice received from NGET to give stakeholders the maximum opportunity to comment”. National Grid argued that it needed two additional Black Start units in northern England and it ensured a competitive process by publishing a call for expressions of interest, before negotiating bilaterally with the two parties that responded.
Full consultation here