Energy regulator Ofgem has published a notice ordering electricity generator EP SHB Ltd to pay £23.63 million for a breach of its Generation Licence.
Following an investigation, Ofgem concluded that EP SHB secured an “excessive benefit” as a consequence of prices it submitted in the Balancing Mechanism (BM) during periods of transmission constraint. The result saw consumers’ bills raised “unfairly”.
Between October 2019 and May 2021, EP SHB 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 ESO needed it to lower its output.
This breach result in “significantly higher costs” being incurred by the ESO to balance the system, something that led to inflated prices for consumers.
Interestingly, Ofgem announced last month that it had introduced new rules to prevent electricity generators “artificially inflating energy prices and forcing up household bills”. The new rules, which aim to tackle the “excessive profits” that are able to be made by generators through the BM, will prevent this via the introduction of the new Inflexible Offers Licencing Condition (IOLC).
This would prevent generators, much like EP SHB, from using the BM to inflate prices – something that SSE Generation had also been fined for in June 2023. The firm had been issued to pay £9.78 million by Ofgem.
“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 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.”