by Mathew Beech
Ofgem is cracking down on “profiteering” by electricity generators during periods of transmission constraint, with rules published last week. The Transmission Constraint Licence Condition (TCLC) aims to address “long-standing concerns” that generators are receiving an “excessive benefit” from the balancing mechanism.
The balancing mechanism allows National Grid to control the transmission network at times when there is insufficient network capacity by paying generators to reduce their output, or increase their output at certain plants across the UK to spread the load across the system.
National Grid has reported an increase from £169 million in 2010/11 to £319 million in 2011/12 in balancing mechanism payments, blaming a rise in the number of occasions they had to restrict wind units at a high bid price.
It is feared high concentrations of renewables will provide companies with more opportunity to “manipulate and exploit market conditions and charge unduly high prices”.
Under the new rules, Ofgem will monitor payments made through the balancing mechanism at times of constraint in the system and ask generators to justify their dispatch decisions. If any decision is perceived as profiteering, the regulator can impose a fine.
The TCLC will run until 15 July 2017, with an option for the secretary of state to extend this for an additional two years.
This article first appeared in Utility Week’s print edition of 2nd November 2012.
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