Crackdown on energy profiteers: Ofgem proposes new Balancing Mechanism rules

The energy regulator has initiated a consultation to address concerns over electricity generators seeking excessive financial gain through the Balancing Mechanism

The energy regulator, Ofgem, has initiated a consultation following revelations that some electricity generators have been exploiting the Balancing Mechanism to gain excessive profits.

The Balancing Mechanism serves as a tool for balancing supply and demand on Britain’s electricity transmission network.

Ofgem’s concerns arise from instances where thermal generators deliberately scheduled their shutdowns in the afternoon, rendering them unavailable for the evening peak period.

These generators then used the Balancing Mechanism to offer high-priced contracts to the ESO, resulting in elevated balancing costs passed on to consumers.

On high-cost days, these generators have been demanding rates as high as £6,000 per megawatt-hour (MWh) for extended periods of five to six hours.

In response, Ofgem aims to introduce new reforms through a statutory consultation to address these issues and protect consumers.

Interested parties can provide feedback until 27th July and Ofgem expects to finalise its decision later this year.

Eleanor Warburton, Acting Director for Energy Systems Management and Security, said: “The proposed new licence condition will ensure electricity generators don’t take advantage of existing rules to make excessive profits in the Balancing Mechanism.”

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