Ofgem has confirmed that electricity generator, Drax Pumped Storage Limited, has agreed to pay £6.12 million to the Voluntary Energy Redress fund for breaching its Electricity Generation License.
The energy regulator detailed that between 1 January 2019 and 31 July 2022, Drax obtained immoderate payments from National Grid ESO by submitting “excessively expensive” bids to reduce its generation in the Balancing Mechanism – in relation to Cruachan Power Station – during periods of transmission constraints.
Transmission constraints occur when the electricity transmission system cannot transmit power to the demand location due to congestions. In this case, National Grid ESO can request action in the market to manage the constraint by adjusting the amount of electricity at different network locations.
Ofgem said that the Drax Pumped Storage has provided its full corporation with the investigation and has “proactively sought to rectify the matter”.
The £6.12 million payment will be given to the Voluntary Energy Redress fund to support vulnerable households with their energy bills, as well as invest in innovation projects and carbon emission reductions.
“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,” said Cathryn Scott, director of enforcement and emerging issues at Ofgem.
“This enforcement action sends a strong signal to all generators that they cannot obtain or seek to obtain excessive benefits during transmission constraint periods. If they do, we have the powers to intervene and we are ready to use them.”
Drax has assured that it has now implemented a cost-based pricing methodology in response to the breach, which is designed to accurately reflect the costs and benefits of curtailing its generation.
A Drax spokesperson said: “Drax takes its responsibilities under the terms of its Generation Licence very seriously and co-operated fully with Ofgem in order to resolve this issue relating to its operations at Cruachan pumped storage power station in Scotland. We have put measures in place that are designed to prevent this from happening again.”