Ofgem intends to require electricity generator EP SHB Ltd to pay redress of £23.63 million for breaching its generation licence at its South Humber Bank power station, raising consumers’ bills.
Ofgem has concluded that between October 2019 and May 2021, EPSHB breached the Transmission Constraint Licence Condition (TCLC) by submitting excessive bid prices at its South Humber Bank gas-fired power station (SHBA) during periods when the Electricity System Operator (the ESO) needed it to lower its output. The reduction in SHBA’s output was required due to the risk to consumers’ supply should a fault have suddenly disconnected the Lincolnshire facility from the transmission system.
The breach resulted in significantly higher costs being incurred by the ESO to balance the system, ultimately increasing costs for consumers.
Ofgem said the scale of the sum proposed – to be paid to Ofgem’s Energy Redress Fund, which supports energy-related charities and community projects that help vulnerable consumers – “reflects the scale of the excessive payments secured by EPSHB and the extended period of the breach.”
This is the third action that Ofgem has taken against electricity generation companies this year in relation to breaches of the TCLC, following actions involving Drax Pumped Storage Ltd (required to pay £6.12 million) and SSE Generation (required to pay £9.78 million).
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem said:
“Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users.
“This latest enforcement action sends another strong signal to all generators that they must put in place controls to ensure that their bid prices are set in a way that ensures that they do not obtain excessive benefits during transmission constraint periods.
If they fail to do so, licensees should expect to face large penalties, particularly in light of the repeated warnings which have been given regarding our expectations of generators in respect of the TCLC.”
Written representations or objections to Ofgem’s proposal must be received no later than 10 November 2023 and will be considered prior to Ofgem reaching its final decision on whether to impose a penalty on EPSHB.