Drax has paid out £6 million after admitting “inadvertently” submitting excessive bids to turn down generation at its pumped storage station in Scotland.
Under the Balancing Mechanism generators can submit offer prices to turn up generation, or bid prices to turn down generation, and are selected on a competitive basis by National Grid Electricity System Operator (ESO) according to system need.
Bid prices are the amount a generator is willing to pay (if positive) or be paid (if negative) by the ESO in the Balancing Mechanism to turn down its generation when needed to help balance the transmission system. When turned down, the station can still sell power as if it were generating.
Drax has admitted to inadvertently breaching its electricity generation licence by submitting excessively expensive bids to turn down its 440MW Cruachan Power Station in the Scottish Highlands during periods of transmission constraint.
The breach occurred during a three-and-a-half-year period between January 2019 and July 2022.
Ofgem said that in the period since it raised the matter with Drax, the company has fully cooperated with the regulator.
“Drax has proactively sought to rectify the matter, including agreeing to make a payment to the redress fund and assuring Ofgem that it has implemented a new cost-based pricing methodology designed to reflect the costs and benefits to Drax of curtailing its generation,” Ofgem added.
Drax agreed to pay a total of £6.12 million into the Voluntary Energy Redress Fund.
A Drax spokesperson said: “Drax takes its responsibilities under the terms of its generation licence very seriously and co-operated fully with Ofgem in order to resolve this issue relating to its operations at Cruachan pumped storage power station in Scotland.
“We have put measures in place that are designed to prevent this from happening again.”
Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: “This enforcement action sends a strong signal to all generators that they cannot obtain or seek to obtain excessive benefits during transmission constraint periods. If they do, we have the powers to intervene and we are ready to use them.”