Ofgem introduced a financial incentive to help the National Grid Electricity System Operator (National Grid ESO) produce more accurate forecasts in 2017. Between April and October 2017, these forecasts were either over or under demand.
National Grid ESO received £130,000 from the incentive during the inaccurate electricity demand forecasts, but investigation found the ESO did not have to sufficient compliance in place to provide forecasts with the accuracy Ofgem wanted.
Energy suppliers across the UK often rely on these forecasts so they know how much electricity to both generate and purchase. This can cause suppliers to either buy too much and sell back at a loss, or buy too little and have to cover the shortfall - in both instances higher prices can be passed on to consumers.
National Grid ESO has agreed to pay £1.5 million into Ofgem's voluntary redress fund to support vulnerable energy consumers and further innovation.
Ofgem’s Director of Enforcement Cathryn Scott 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.”