Ofgem to review National Grid ESO’s £718m balancing costs during lockdown

The energy regulator says the cost of managing the grid during the period from March to July was 39% higher than expected

Ofgem has announced its intention to investigate the high balancing costs of the UK’s electricity system during the Spring and Summer of this year.

In an open letter, the energy regulator says during the period from March to July, balancing costs have risen to £718 million, which is 39% higher than the National Grid ESO’s expected costs for this period.

Ofgem will try to assess the extent that any of the operability challenges experienced during this period were known or ‘foreseeable system limitations’.

The regulator will also attempt to understand the extent to which the specific situation during this period was due to the coronavirus pandemic or part of a trend of minimum demand falling year on year and other system trends.

It will also investigate the extent to which the operability challenges met the standards required of the ESO.

Ofgem’s review will also focus to evaluate the extent to which the actions taken by the ESO delivered value for money to consumers.

The regulator aims to finish the review by the end of October to coincide with its mid-year review.

A National Grid ESO spokesperson said: “We welcome this review and look forward to working with Ofgem and further explaining system balancing and associated costs during this Spring and Summer and the impact of Covid-19.

“Throughout this period we have been transparent with our actions, hosting weekly update webinars to share information on system balancing and the associated costs. We have also been engaging directly with BEIS and Ofgem ahead of making key decisions.

We fully understand and support the need to help manage costs associated with Covid-19 in the best interests of consumers and continue to work closely with industry parties and Ofgem on how best to achieve this.”

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