Ofgem opens an investigation into the overcharging of two electricity producers | Ofgem

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Ofgem is investigating two companies to determine whether they have overcharged the network to reduce production levels.

The Energy Regulatory Authority said it was looking into whether EP SHB, which owns the gas power plant at South Humber Bank, and SSE Generation had violated the terms of their licenses in a way that could have ultimately led to higher household energy bills.

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

To do this, the grid can ask generators to stop producing, or reduce the amount of electricity they put into the grid. In turn, the network will often pay these generators to shut down or reduce their production.

But Ofgem is now studying whether SSE Generation has at times asked for too much money to stop or slow production from a pumped Foyers storage power plant.

The site operates by pumping water from Loch Ness to Lake Mohor when the electricity is in good condition. It then allows gravity to push the water into Loch Ness, pushing it through a generator on the way to generate electricity.

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

The regulator will consider whether this is in breach of the generators’ duty not to charge “expensive” prices.

Meanwhile, between October 2019 and May 2021, EP SHB regularly set bid prices at £0 per megawatt-hour for production cuts at the gas plant, “a level that has been particularly costly for a gas-fired power plant,” Ofgem said.

The production cut also means that producers are saving money they would have spent buying gas to burn.

“Since this is an open investigation, we have no comment at this point,” EP SHB said.

SSE said: “SSE notes Ofgem’s announcement this morning in relation to the Foyers pumped-energy storage plant. As a responsible operator of the asset generation, SSE will be fully committed to the investigation.”

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