Notice of penalty - EP SHB Limited

Source: 12/7/2023, Location: Europe

Following a detailed investigation, Ofgem has decided to impose a financial penalty on EP SHB Limited (EPSHB), requiring it to pay £23.63 million for breaching its generation licence in a way that unfairly raised consumers’ bills. Full details of our decision can be found in the decision notice, linked below.

The penalty relates to our finding that EPSHB secured an excessive benefit as a consequence of prices it submitted in the Balancing Mechanism during periods where what is known as a ‘transmission constraint’ occurred.

More specifically, Ofgem’s investigation found that between October 2019 and May 2021, EPSHB breached the Transmission Constraint Licence Condition (TCLC) by submitting excessive bid prices at its South Humber Bank gas-fired power station (SHBA) during periods when the ESO needed it to lower its output.

This reduction in SHBA’s output was required due to the risk to consumers’ supply should a fault have suddenly disconnected the Lincolnshire facility from the transmission system.

The breach resulted in significantly higher costs being incurred by the Electricity System Operator (the ESO) to balance the system, ultimately increasing costs for consumers.

The large sum proposed – to be paid to Ofgem’s Energy Redress Fund, which supports energy-related charities and community projects that help vulnerable consumers – reflects the scale of the excessive payments secured by EPSHB and the extended period of the breach.

No representations were received in response to our notice of 13 October 2023 setting out our intention to impose the penalty on EPSHB. We remain of the view that a breach of the TCLC has occurred, and that the level of the proposed penalty is appropriate.

This investigation is part of the ongoing compliance work undertaken by Ofgem to ensure that the market is fair for everyone. Ofgem expects licensees to be fully aware of their legal obligations (including compliance with the TCLC) and have adequate procedures in place to prevent breaches from occurring.

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