Ofgem has closed its compliance engagement with ESB Independent Generation Trading Limited (‘IGT’) and Carrington Power Limited (‘Carrington’). IGT controls the generation output of Carrington’s power plant. This engagement related to the submission of inaccurate data to National Grid Electricity System Operator (‘NGESO’) on Carrington power plant’s ‘dynamic parameters’, which gave false or misleading signals as to the supply of wholesale energy. IGT and Carrington have admitted to inadvertently breaching REMIT and Grid Code obligations and agreed to make a £6m payment to the voluntary redress fund.
From March 2019 to September 2020, Ofgem found that Carrington, at the direction of IGT, regularly submitted data to NGESO which inflated its plant’s Stable Export Limit (‘SEL’) above the minimum level at which the plant could, under stable conditions, export power. It routinely did so on the request of IGT traders in periods when IGT and Carrington were seeking to generate in the Balancing Mechanism. On some of these occasions, Carrington also submitted data to NGESO on request of IGT traders which inflated the plant’s Minimum Non-Zero Time (‘MNZT’). This relates to the minimum time that a Balancing Mechanism unit must run for in response to an instruction to generate from NGESO. These practices meant that NGESO at times was required to purchase a greater volume of power from IGT than needed when the plant was called on to generate in the Balancing Mechanism.
The Grid Code (Balancing Code 1.4.2(e) requires dynamic parameters (which include SEL and MNZT) to reasonably reflect the expected true operating characteristics of the Balancing Mechanism Unit. The Grid Code (Balancing Code 1.4.3) also requires Balancing Mechanism participants to use reasonable endeavours to ensure data held by NGESO (including data in relation to their power plants’ dynamic parameters) is accurate at all times. By submitting dynamic parameters which did not reflect the true operating characteristics of the plant, Carrington has admitted that it inadvertently failed to meet its Grid Code obligations and its licence obligation to comply with the Grid Code.
IGT and Carrington have also admitted that they inadvertently breached Article 5 of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (‘REMIT’), owing to Carrington’s submission of inaccurate dynamic parameters to NGESO on request of IGT which gave false or misleading signals as to the supply of wholesale energy in the circumstances described above. Article 5 of REMIT prohibits market participants from engaging in or attempting to engage in market manipulation1.
IGT considered its approach to changing Carrington’s dynamic parameters was in line with its understanding of its regulatory obligations at the time. IGT also considered that, recovering the fixed costs of generating over a greater volume, would result in lower balancing costs. However, now IGT acknowledges that the approach was a breach of its regulatory obligations and sometimes led to NGESO purchasing a larger volume of power and spending higher amounts to balance the system than necessary.
Ofgem considers that in respect of the submission of dynamic parameters IGT and Carrington had insufficient procedures and internal controls in place to prevent non-compliance. The two companies have since confirmed that they have improved their REMIT and Grid Code compliance processes and training, and contributed constructively during Ofgem’s compliance engagement.
IGT and Carrington have agreed to make a collective payment of £6m to Ofgem’s voluntary redress fund. Ofgem has decided to close this compliance engagement without taking further enforcement action, taking into account the companies’ admission of the breaches, the steps taken to avoid any future reoccurrence and the redress they have agreed to pay. If the companies had not taken these actions, Ofgem would have opened a formal enforcement investigation into their conduct.
NGESO relies on information submitted by generators, including dynamic parameters, to select which balancing actions to take in a given period and to ensure system balancing can be achieved in an efficient and economic manner. As outlined in an open letter on 29 September 2020, Ofgem expects all Balancing Mechanism participants to provide accurate information to NGESO in compliance with their Grid Code and REMIT obligations, and generators must not use dynamic parameters as a commercial tool to influence payments received by NGESO.
1 In a finding against InterGen in April 2020 the Authority established that the submission of inaccurate dynamic parameters data by generators to NGESO in the Balancing Mechanism would constitute a breach of the ‘market manipulation’ prohibition under REMIT.