Three major energy companies have been accused of exploiting loopholes in the Balancing Mechanism earning £525 million.
It has been reported that Uniper, SSE and Vitol VPI manipulated the electricity market by promising to power down their power stations during peak hours, only to demand a much higher price from the grid to keep running.
National Grid requests more electricity from power companies when its supplies are under pressure and offers a higher payment to generators to bridge the gap.
However, some firms have allegedly been notifying National Grid that they will power down, often with only a few hours’ notice before peak times.
Bloomberg has investigated more than 100 million market records and found that these tactics resulted in more than £525 million in inflated revenues for these firms.
A spokesperson for SSE told ELN: “As a responsible operator SSE fully complies with all relevant rules and regulations and it notes that following an independent review of the Balancing Mechanism, which included the periods in question, Ofgem confirmed that it found no specific evidence of behaviour inconsistent with market rules.
“The recent tightness in power markets reaffirms the need for increased investment in GB electricity infrastructure. SSE is fully committed to playing its part and is investing more than it earns in profits.
“The group’s net investment could potentially exceed £24 billion over the course of this decade – equivalent to c.£7 million per day – supporting thousands of good green jobs across the UK.”
According to an Ofgem spokesperson who spoke with ELN, the priority of the energy regulator is to safeguard the interests of consumers, and any attempts by energy firms to exacerbate market conditions, whether deliberate or not, are not acceptable.
The regulator is taking steps to introduce a new obligation into electricity generation licences that will prohibit generators from manipulating the balancing mechanism for excessive financial gain.
Ofgem is expected to make a final decision on implementing this new obligation for generators in the coming summer months, and the regulator is keen to ensure that its regulatory interventions are well-considered and effective in curbing such practices.
A Department for Energy Security and Net Zero spokesperson told ELN: “It is critical in all times that consumers pay a fair price for their energy, so this practice is clearly completely unacceptable.
“The regulator Ofgem is aware of this concerning behaviour from a handful of participants involved and is urgently looking into this further.”
ELN has reached out to both Uniper and Vitol VPI for comment regarding the allegations.