Ofgem investigating whether two companies took advantage of network constraint payments

Regulator Ofgem has opened an investigation into the behaviour of two electricity generating companies asked by the system operator to accept bids to reduce generation to help manage transmission constraints.
The Electricity System Operator manages transmission constraints by instructing generators to reduce their output, by accepting bids in the Balancing Mechanism. But the generators are required not to take advantage of the fact that the ESO typically has limited options available to resolve a constraint.
The regulator is investigating whether EP SHB, which owns and operates South Humber Bank CCGT, accepted “excessively expensive” bids between October 2019 and May 2021.
It is also investigating whether SSE Generation, which owns and operates the Foyers pumped storage plant, submitted excessively expensive bids – especially in transmission constraint periods in which it had also notified the ESO that it intended to generate (and so was contributing to the constraint rather than helping to alleviate it).
Ofgem said transmission constraint costs have gone up over time, and are expected to continue to rise as the types and location of generation connected to the transmission system change to decarbonise the energy system. “Given this, licensees’ compliance with the TCLC is crucial in order to ensure that the transition to net zero can take place at the lowest cost possible.” It said, “We encourage all generators to take steps to ensure that their bid prices are not excessive where a transmission constraint may be present, through applying a robust approach to estimating all of the costs, avoided costs and operational risks of curtailment and regularly reviewing it.”

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