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Households to be protected from ‘excessive’ electricity bill profits

31 Aug 2023 2 minute read
Picture by Peter Byrne / PA Wire.

Households are to receive extra protection from artificially inflated electricity bills in a crackdown on generators attempting to make excessive profits.

Ofgem has announced new rules to take effect this winter to prevent generators from manipulating supply and demand on Britain’s electricity transmission network.

The Inflexible Offers Licence Condition (IOLC) bans a practice used by electricity generators in previous winters when they scheduled a halt to generating early in an afternoon which, due to plant shutdown times, would mean they were switched off for the crucial evening peak in demand.

The firms then offered to resume generating later that day, at a greatly increased price.

Investigation

Ofgem launched an investigation last year amid concerns that some generators were taking advantage of existing rules after their balancing costs tripled to more than £1.5 billion between November 2021 and February 2022, compared with a winter average of just under £500 million between 2017 and 2020.

The record-breaking daily costs, which are ultimately paid by consumers, peaked above £60 million on November 24 2021, driving up the operator’s overall balancing costs to £3.1 billion that financial year.

The new rules apply to any electricity generators with plant shutdown times of more than an hour.

Any generators found to be breaking the new rules from October 26 could face fines of up to 10% of turnover.

Eleanor Warburton, Ofgem acting director for energy systems management and security, said: “This new licence condition shows Ofgem will not tolerate electricity generators attempting to take advantage of the balancing mechanism system to make excessive profits through inflexible generation.

“We believe the new licence condition strikes the right balance between protecting consumers and ensuring they pay a fair price for their energy while also enabling a competitive electricity market that provides fair returns for generators.

“We’ll be monitoring the effectiveness of it to ensure it’s doing what it was designed to do.”


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Barney Blobster
Barney Blobster
7 months ago

There shouldn’t be any fair returns for generators, it is a service, a necessity and should be generated at the lowest cost possible for subscribers, we will never get a fair price while the system is privatised. They were already making a fortune and still they found a way to screw us for even more money it is disgusting.

Frank
Frank
7 months ago

When did the standing charge for electricity go up? On my most recent bill my daily charge is nearly 52p or nearly £190 per year. What for? Surely this is legal robbery!!!

Steve A Duggan
Steve A Duggan
7 months ago

So the generaters may be fined up to 10% of turnover – that’s great (though it should be far far more) but will we, the public, see any of it? Will we get reimbursed or will it just go into the government’s coffers? The war in Ukraine, though costly, has been an excuse for companies to increase their profits at our expense. It was used as an reason to profiteer. It’s time we stopped taking a hit from these greedy energy, food and banking organisations!

Frank
Frank
7 months ago
Reply to  Steve A Duggan

The advantage of running a business is that you can pass the cost of the fine on to the consumer by upping the price. No pain whatsoever!!

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