Ofgem has revealed it will not reconcile payments made by National Grid Gas to the greenhouse gas emissions incentive due to the use of an incorrect carbon reference price.
National Grid wrote to the industry regulator in October 2017 and February this year to explain two issues about how incentive payments had been calculated.
These related to:
- The use of an out of date carbon reference price in formula year 2016/17
- The incorrect inclusion of station vent emissions between formula years 2013/14 and 2016/17
National Grid said the errors meant over payments of £361, 587 for the inclusion of the station vents had been made dating back to 2013/14. While £74,151 for using the wrong carbon reference price had been made in 2016/17.
Ofgem said it was “not persuaded” that there is sufficient justification to reconcile the incentive payments made in 2016/17 to reflect the carbon reference price published in December 2015 in a letter to National Grid Gas’ senior commercial developer Chris Hewitt.
Louise Van Rensburg, the regulator’s interim deputy director, SO and whole systems, wrote: “We agree that an incorrect carbon reference price was used to calculate incentive revenue in 2016/17. This was an oversight on your part and we are satisfied with the assurances that you have given that a similar mistake will not be made in the future.
“However we are not persuaded that there is sufficient justification to reconcile the incentive payments made in 2016/17 to reflect the carbon reference price published in December 2015. You are responsible for the accuracy of the data values submitted and for ensuring that the values are correct. Consequently we will not adjust this payment.”
Ofgem has, however, decided to reconcile some of the greenhouse gas emissions incentive payments that National Grid Gas has made.
In the case of the query over incorrect inclusion of station vent emissions National Grid believes the interaction between licence definitions for natural gas venting and reporting requirements in the regulatory instructions and guidance has caused station vent emissions to be included incorrectly in the incentive payments.
The regulator accepted that the licence can “reasonably be interpreted” so that emissions identified as a result of the scheme of work should not be included in the incentive revenue calculation.
Ofgem added: “We consider this is a reasonable interpretation of the existing licence text. However, while we recognise that the licence can be interpreted in such a way to justify reconciling the incentive, we remain to be convinced that the existing text is suitable.
“In particular, we are concerned that SCs 3D and 8H contain separate definitions for the same activity – the venting of natural gas.
“We are content to reconcile the incentive payments described above.”
Following on from its decision Ofgem will review the incentive as part of the next price control and consider the need for any further changes or revisions as part of that process.