Investigation into EP SHB Limited’s compliance with the TCLC
Investigation
- Open
- Decision proposed
- Closed
Publication date
Closed date
Company
Industry sector
Generation and Wholesale Market
Licence type
Electricity Generation Licence
Related links
Decision
On 4 October 2021, Ofgem opened an investigation into whether EP SHB Limited ("EPSHB", the owner and operator of South Humber Bank gas-fired power station) failed to comply with the requirements of condition 20A of the Electricity Generation Standard Licence Conditions (known as the Transmission Constraint Licence Condition, or “TCLC ”).
A transmission constraint is defined in the TCLC as any limit on the ability of the national electricity transmission system, or any part of it, to transmit the power supplied onto the system to the location where the demand for that power is situated. In order to manage transmission constraints, the electricity system operator (“ESO”) routinely uses the balancing mechanism (“BM”) to increase and decrease the amount of electricity produced by different generators.
Typically, when managing a transmission constraint, the ESO will only have a limited number of alternatives available to it. This creates a risk that generators could exploit their position by charging excessive bid prices to reduce their output. The TCLC prohibits them from doing so.
Following a detailed investigation, Ofgem found that between October 2019 and May 2021 EPSHB breached the TCLC by submitting excessive bid prices at its South Humber Bank power station during periods when the ESO needed it to lower its output. This reduction in South Humber Bank’s output was required due to the risk to consumers’ supply should a fault have suddenly disconnected the Lincolnshire facility from the transmission system. EPSHB's excessive prices in this period resulted in significantly higher costs being incurred by the ESO to balance the system, ultimately increasing costs for consumers.
On 13 October 2023 we published notice that we intended to require the company to pay £23.63 million into the Energy Redress Fund as a consequence of the breach (a link to this notice is provided below). On 7 December 2023, having considered representations received in response to that notice, Ofgem confirmed its decision, closing the investigation. EPSHB is required to make the payment no later than 18 January 2024.