Households to be protected from ‘excessive’ electricity bill profits
Ofgem has announced new rules to prevent generators from manipulating supply and demand in Britain’s electricity transmission network.
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Households are to receive extra protection from artificially inflated electricity bills in a crackdown on generators attempting to make excessive profits.
Ofgem has announced new rules to take effect this winter to prevent generators from manipulating supply and demand on Britain’s electricity transmission network.
The Inflexible Offers Licence Condition (IOLC) bans a practice used by electricity generators in previous winters when they scheduled a halt to generating early in an afternoon which, due to plant shutdown times, would mean they were switched off for the crucial evening peak in demand.
The firms then offered to resume generating later that day, at a greatly increased price.
Ofgem will not tolerate electricity generators attempting to take advantage of the balancing mechanism system to make excessive profits
Ofgem launched an investigation last year amid concerns that some generators were taking advantage of existing rules after their balancing costs tripled to more than £1.5 billion between November 2021 and February 2022, compared with a winter average of just under £500 million between 2017 and 2020.
The record-breaking daily costs, which are ultimately paid by consumers, peaked above £60 million on November 24 2021, driving up the operator’s overall balancing costs to £3.1 billion that financial year.
The new rules apply to any electricity generators with plant shutdown times of more than an hour.
Any generators found to be breaking the new rules from October 26 could face fines of up to 10% of turnover.
Eleanor Warburton, Ofgem acting director for energy systems management and security, said: “This new licence condition shows Ofgem will not tolerate electricity generators attempting to take advantage of the balancing mechanism system to make excessive profits through inflexible generation.
“We believe the new licence condition strikes the right balance between protecting consumers and ensuring they pay a fair price for their energy while also enabling a competitive electricity market that provides fair returns for generators.
“We’ll be monitoring the effectiveness of it to ensure it’s doing what it was designed to do.”