Energy security minister Grant Shapps has called on regulator Ofgem to deal with alleged manipulation of the UK’s energy balancing market, after costs have soared in recent years.
Balancing payments, made by National Grid PLC (LSE:NG.)’s system operating wing (ESO) at the expense of billpayers to ensure energy generation meets demand in real time, hit £4.2bn in 2022, up 250% on 2019’s £1.2bn.
A Bloomberg investigation, published on Friday, subsequently accused generators of scoring £525mln in additional revenue between 2018 and 2022, from upping asking prices when approached by the ESO to alter output.
Shapps responded: “This Bloomberg investigation clearly shows Ofgem needs to properly look into this and identify if this is market manipulation or based on genuine need.
“I want to see them going further and faster, or it will be the taxpayer paying the price for their failure to hold these companies to account.”
Ofgem has suggested new clauses could be introduced to stem the costs of balancing the UK’s energy supply, including through price caps or even an entire overhaul of the market.
It fined Drax Group (LSE:DRX) £6.1mln in January after it was found to be overcharging the ESO when asked to turn down generation from its Crachan pumped-hydro plant in Scotland, leading to "excessive payments".
A final decision on reforms will not be made until the summer though, Ofgem said, suggesting asking prices have fallen since its call for input from firms late last year.