The energy regulator has ordered power generator Drax to pay a record £28m for failing to help thousands of deprived households save money on their electricity bills.
Drax, operator of Britain’s largest coal-fired power station, near Selby (left), will pay up to £20m to consumers who missed out on the savings, with a further £8m to be paid partly as a fine and partly to consumers. Another generation company, InterGen, will pay a fine of £11m.
Ofgem found that Drax met only 37% of its obligations under the community energy saving programme (Cesp). Generators and energy suppliers were required to provide energy-saving measures to households in low-income areas to cut carbon dioxide emissions, reduce bills and keep homes warm. The regulator will give decisions on British Gas, SSE and GDF/Suez in the next few weeks over their compliance with Cesp.
Ofgem said Drax’s senior management knew the company was likely to miss its targets 18 months before the Cesp ended in December 2012. Drax failed to take action to increase its chances of complying and did nothing to make up for it after the deadline passed. Ofgem said Drax’s lack of action after the deadline played a big part in its decision.
If Drax had not agreed to settle the investigation the fine would have been higher. The fine ensures that Drax gains no benefit from its failure to help cut bills and emissions on time.
Sarah Harrison, Ofgem’s senior partner for enforcement, said: “Drax missed its target by a clear margin, disadvantaging several thousand households in some of the most deprived areas in Britain. Not only are these consumers missing out on energy efficiency measures that would help keep their homes warm, they also face higher energy bills as a result. Today’s agreement to pay £28m reflects the seriousness of the consequences of these failings for consumers.”
Ofgem’s previous biggest penalty was a £15m fine for National Grid in 2010 for anti-competitive metering.
InterGen met only 6.4% of its Cesp obligations by the deadline but took steps to make up the shortfall and ended up achieving 61% of its target.
Drax objected from the outset to its inclusion in Cesp, saying independent generators had no direct relationship with domestic electricity customers and no experience of providing energy efficiency measures. It paid an outsourced company £17m to do the job and blamed that company for the failure.
Dorothy Thompson, Drax’s chief executive, said: “We take our statutory obligations very seriously and in the case of the Cesp we always sought to maintain a compliant position. We believe the design of the Cesp was flawed and significant problems were encountered with scheme delivery, the Cesp market and the complex arrangements.
“We are deeply disappointed with the magnitude of the fine. However, we believe it is in our shareholders’ interests to settle this matter and, as the nation’s single largest power provider, focus on delivering a reliable supply of electricity this winter.”
Ofgem also announced that five of Britain’s energy companies had agreed to spend £17bn to upgrade the electricity network and connect small-scale renewable generation. It cut the estimate for household bill savings to £11 from an earlier figure of £12.
