Ofgem has carried out 11 investigations into behaviour in energy markets, taken forward from 677 ‘alerts’ about potentially concerning behaviour, since 2013. the regulator said. The figures came in an update on outcomes of the EU’s ‘Remit’ reporting system over the past five years.
The regulator said it had yet to make a formal finding that a party had breached regulations.
Following one investigation, Ofgem warned National Grid Electricity Transmission (NGET) that it must improve its IT and information services or it may undermine market confidence and suffer legal action. Ofgem asked market participants to bring forward concerns about the system operator’s performance.
As reported in August’s New Power Report, the immediate cause for the regulator’s warning was an investigation into a series of occasions between November 2015 and January 2016 when NGET published erroneous information about de-rated margin calculations. That led to false market signals in the wholesale electricity market that breached EU rules on market manipulation. Ofgem investigated the breach in its role as GB enforcement authority for the EU’s Regulation on Energy Market Integrity and Transparency (Remit). It said: “Our investigation highlighted a number of deficiencies in NGET’s processes which resulted in the undermining of market confidence and had a direct impact on the integrity and transparency of the GB wholesale energy market.”
The regulator said that the system operator (SO) had escaped action because the problems were “unintentional” and caused by errors in internal processes, and the impact had been relatively low. Also, the SO had published “lessons learned” documents and altered its processes.
After its Remit breach investigation Ofgem said: “This incident is one of several instances over the past year where we have observed NGET providing inadequate information, IT systems and processes. We consider these incidents to be below the standards we, and market participants, expect from the system operator.” It added: “The cumulative impact of all these incidents on market confidence may give us sufficient grounds to take further enforcement action should they continue to occur in the future.”
It set out actions for the SO to take, saying: “As a first step, we expect NGET to engage with market participants. For example, by forming a working group with industry participants to establish a programme that ensures that the information provided, and the IT systems used, meet the needs and expectations of market participants.”
It added: “We also encourage market participants to raise any concerns about the performance of the SO with us.”
The investigation came as National Grid delayed implementation of other software systems, notably a new electricity balancing system that is now not expected to be fully in place until the end of 2018.
It also came as the regulator was consulting with the industry on spinning out National Grid’s system operator role to be more independent. In a new working paper on the future regulatory framework, Ofgem proposed new independently audited key performance indicators and incentive payments for the system operator. Fundamental principles for the new SO will include providing user-friendly, comprehensive and accurate market information and promoting competition.
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