Ofgem has announced its intention to impose a substantial penalty of £23.6 million on electricity generator EP SHB Ltd (EPSHB).
This penalty comes in response to a breach of its generation licence that resulted in increased costs for consumers.
The investigation carried out by Ofgem has revealed that EPSHB benefitted excessively from the prices it submitted in the Balancing Mechanism during periods of a “transmission constraint.”
This breach occurred between October 2019 and May 2021, Ofgem said.
Specifically, EPSHB breached the Transmission Constraint License Condition (TCLC) by submitting bid prices that were higher than necessary for its South Humber Bank gas-fired power station during times when the electricity system operator (ESO) required it to reduce its output.
This reduction in output was necessary to ensure the security of the supply to consumers, in case a fault disconnected the Lincolnshire facility from the transmission system.
This breach ultimately led to significantly higher costs for the ESO to balance the system, which were then passed on to consumers.
To address this issue, Ofgem has proposed that EPSHB pay the £23.6 million penalty to Ofgem’s Energy Redress Fund.
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem, said: “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.”
