Ofgem opens overcharging inquiry into two electricity producers

Ofgem is investigating two companies to establish whether they overcharged the grid to lower their production levels.

The energy regulator said it was looking into whether EP SHB, which owns the South Humber Bank gas power plant, and SSE Generation broke the terms of their licences in a way that could have ultimately pushed up household energy bills.

A key part of ensuring that the lights stay on across Britain is to balance the grid. This means it is important that power plants do not generate more electricity than households and businesses use at any given point, and equally that supply is equal to demand.

To do this the grid can ask electricity generators to stop producing, or reduce the amount of electricity they are putting into the grid. In return the grid will often pay these generators to turn off or reduce their production.

But Ofgem is now looking into whether SSE Generation at times requested too much money to stop or slow production from its Foyers pumped storage power station.

The site works by pumping water from Loch Ness to Loch Mhor when electricity is in good supply. It then allows gravity to push the water back down to Loch Ness, pushing it through a generator on the way to create electricity.

To slow production SSE Generation charged the grid prices of up to £60 per megawatt hour (MWh) starting in May 2020. This was “significantly more expensive” than the prices it had submitted in the past, Ofgem said.

The regulator will examine whether this breaks the duty of generators not to charge “excessively expensive” prices.

Meanwhile, between October 2019 and May 2021, EP SHB regularly set bid prices of £0 per MWh to reduce production at its gas plant, “a level which was particularly expensive for a gas-fired power station”, Ofgem said.

Reducing production also means that producers save money that they would otherwise spend on buying gas to burn.

EP SHB said: “As this is an open investigation, we have no comment to make at this stage.”

SSE said: “SSE notes Ofgem’s announcement this morning in relation to its Foyers pumped storage power station. As a responsible operator of generating assets, SSE will be complying fully with the investigation.”

Comments are closed.