The power company owned by the Czech billionaire Daniel Křetínský has been ordered to pay £23m after the energy watchdog found that it unfairly demanded excessive payments for one of the UK’s biggest power stations, increasing customers’ energy bills.
Ofgem ruled that the company’s energy traders violated market rules by demanding a higher price to turn down the South Humber Bank gas plant in Lincolnshire to earn excessive payments from the energy system operator, heaping higher prices on to consumers.
This is the third power company to face action from Ofgem since it vowed to crack down on energy traders “manipulating” the market to secure “excessive financial gain” at the expense of bill payers.
The regulator said the plant’s owner EP SHB chose to submit higher bids at times when the electricity system operator was likely to pay power plants to stop generating because the grid was constrained.
These “constraint payments”, which are ultimately paid for through energy bills, meant South Humber Bank was able to earn excessive payments for idling the plant between October 2019 and May 2021. The energy system operator pays operators to increase or decrease their output to help “balance” the electricity grid.
Ofgem has requested that the company agree to pay £23m of redress to reflect the scale of the excessive payments, and the extended period over which the company breached market rules in order to secure them.
The regulator’s latest crackdown follows growing concerns that big power plant owners were able to manipulate the market to profiteer from the energy crisis at the expense of bill payers.
Energy companies attracted criticism last year for demanding payments well above normal levels to fire up their power plants. The electricity system operator, which is owned by National Grid, paid a record £27m in a single day to guard against the risk of blackouts, including a payment of £6,000 a megawatt hour for the Rye House plant in Herefordshire.
They were also accused of manipulating market rules to secure multimillion-pound windfalls by withholding electricity supplies when demand for power was high, and then demanding excessive payments to run their idling power plants at short notice. The so-called “off-on manoeuvre” raked in an £525m in extra revenue between 2018 and 2022, according to an investigation by Bloomberg, of which 90% was paid out over the past two years as global energy markets have surged.
The South Humber Bank plant is owned by a UK subsidiary of EP Power Europe, which is 100%-owned by the Czech energy group EPH. The company has made billions since it was founded in 2009 by Křetínský, now a shareholder in West Ham United football club, by snapping up fossil fuel assets across Europe. It bought South Humber Bank from Centrica in June 2017.
EP Power Europe was contacted for comment.
Cathryn Scott, the Ofgem enforcement director, said: “Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users.”
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Ofgem has also taken action against Drax, which resulted in a payment of £6.12m after an investigation into the trading activity of its pumped hydro power plants, and against SSE, which was required to pay almost £10m after securing excess profits for its Foyers pumped storage power station in Scotland.
“This latest enforcement action sends another strong signal to all generators that they must put in place controls to ensure that their bid prices are set in a way that ensures that they do not obtain excessive benefits during transmission constraint periods,” Scott said.
“If they fail to do so, licensees should expect to face large penalties, particularly in light of the repeated warnings which have been given regarding our expectations of generators,” she added.
A spokesman for EP Power Europe said that while the owner of the South Humber Bank power plant has accepted that it breached the relevant licence condition, it maintains that the breach was inadvertent and unintentional.
