Ofgem rejects claim for compensation from two Oftos after cable defect outages

Ofgem has rejected two claims for compensation for outages in subsea cables connecting offshore wind farms. Gwynt y Mor Ofto had claimed £10.3 million and Thanet Ofto Ltd had claimed £11.7 million. In both cases the cause of the outage was cable faults dating back to the manufacturing process.

The two Oftos, which own and operate links connecting the Gwynt y Mor and Thanet offshore wind farms, respectively, to the GB network asked for the outages to be classed as an ‘income adjusting event’ (IAE), ie one that outside their control. In such events Oftos can claim income for the period.

The Oftos argued that the faults should be regarded as force majeure or the responsibility of the company that built the wind farm. Ofgem decided that force majeure did not apply, and said the Oftos should have pursued legal claims against the company that built the wind farm or the connection, rather than use the IAE route.

In its determination for Gwynt y Mor Ofgem said an Ofto should have priced in the risk of a latent cable defect from the start, saying, “We do not consider it to be in the interests of consumers to pass through those costs arising from a type of damage that was (or should have been) foreseeable to a bidder/Ofto, solely because the precise damage of that type that occurred was not foreseeable”. In its determination re Thanet Ofto, it said, “We expect licensees to pursue third parties for remedies in respect of their negligent or below standard work and to put in place other commercial arrangements and risk management practices to ensure they can bear the consequences of such risks in the event there may not be any such recourse. This includes licensees putting in place appropriate insurance arrangements.”

It dismissed Gwnyt y Mor Ofto’s argument that this was a retrospective change in regulation and one that would mean future Ofto owners would price in more risk, raising costs.

Ofgem has still to determine a second IAE claim from Gwynt y Mor Ofto.


Further reading:

Sheringham Shoal Ofto misses out on £85k costs payment due to email error

Gwynt y Mor Ofto told: no paperwork, no ‘exceptional event’

Ofgem warns Oftos it may get stricter on 3rd party outages

Ofto bidding opens for Galloper and Walney Extension


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