The report in the Telegraph cites government sources, who believe energy companies may be ‘profiting unfairly at the expense of (the) consumer’ by producing too much energy and then claiming compensation.
The compensation payments, paid to the energy companies to cover the cost of turning off power stations if the National Grid becomes overloaded, have risen sharply from £84 million a year in 2005 to £325 million last year.
The extra cost – an estimated £600 million – is then paid by customers, and amounts to around £25 a year on top of existing energy bills, which have more than doubled in the past seven years.
Ofgem is investigating Scottish Power and SSE, who supply six million homes, for alleged abuses.
Limits on compensation proposed
The energy minister Charles Henry has vowed to ban this ‘exploitative behaviour’, according to the Telegaph, with rules to go into consultation in the autumn that will limit such compensation payments.
Speaking to the Telegraph, John Robertson, an MP on the energy committee said: “This is a lot of money and consumers are having to pay for it.
“There has to be some kind of retribution. Is this has been happening, it is shocking and must be investigated.”
The proposed limits to compensation are expected to reduce compensation levels by £300 million over the next five years, but energy trade body Energy UK has expressed concerns:
“Generating companies have contracts to fulfill and being ‘constrained off’ the system and unable to supply their customers can prove very expensive to them.”
SSE told the Telegraph: “We have been working with the DECC throughout the consultation period and are confident that we have always been and will continue to operate within the given industry framework.”
ScottishPower said: “We’re looking forward to seeing the guideines from Ofgem and don’t envisage having to make significant changes to what we’re doing.”
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