National Grid Electricity System Operator (ESO) will pay Ofgem £1.5m after failing to provide accurate electricity demand forecasts back in 2017.
One of the key roles of the firm, which is responsible for the transmission of electricity across the UK’s networks, is to provide suppliers with seven day forecasts for power demand.
However back in 2017, the company’s forecasts were “periodically either over or under GB demand”, the watchdog said today.
An investigation showed that at the time National Grid ESO did not have “sufficient compliance processes in place” to provide accurate forecasts.
The firm will pay the money into Ofgem’s voluntary redress fund. By choosing to settle the issue, it has qualified for a 30 per cent discount on a proposed £2.1m penalty.
Cathryn Scott, the regulator’s head of enforcement, said: “In 2017, National Grid ESO did not meet its obligation to provide accurate and unbiased 7-day ahead electricity demand forecasts which ultimately may have risked pushing up the cost of electricity for consumers.
“National Grid ESO plays a vital role in coordinating and managing the supply and demand of Britain’s electricity. Many suppliers rely on accurate electricity demand forecasts to buy electricity for their customers.
“Ofgem’s rules on publishing accurate information are clear and must be followed. The £1.5 million payment sends a strong message to the system operator that it must follow the rules.”
In a statement, National Grid ESO said: “We acknowledge Ofgem’s decision and have cooperated fully throughout their investigation.
“Ofgem’s findings relate to a five-month period in 2017 immediately following the introduction of a new 7-day ahead demand forecasting process and an associated new incentive scheme. The investigation has not raised any concerns with our current electricity demand forecasts.
“The actions taken four years ago were seeking to achieve more accurate forecasting. However, we acknowledge that, despite this intention, our processes at the time related to the new demand forecast process were not fully developed.”
Richard Neudegg, head of regulation at Uswitch.com, comments: “Accurate and unbiased forecasts about the country’s energy demands are key to making sure that suppliers pay the right price for our power.
“When these forecasts are wrong, providers can incur extra costs by purchasing too much or too little power, and these charges invariably end up being passed on to consumers.
“It’s concerning that not enough was done to manage the processes around this for more than five months.”