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The Energy and Climate Change Committee has demanded the regulator investigates concerns that the power market was manipulated earlier this month during National Grid’s first capacity crunch alert in four years.
The ECCC questioned National Grid in a one-off hearing on Tuesday, and committee chair Angus MacNeil has since told the Telegraph that the MPs are planning to write to Ofgem asking it to look into how generator Calon Energy was able to secure a market-topping £2.5k/MWh payout from National Grid just hours after removing its unit from the market at a time of system stress.
“There is uncertainty around the events of November 4, but it is crucial that Ofgem establish whether major electricity generators are manipulating power prices during periods of insufficient supply,” he told the newspaper.
“We will be writing to the energy regulator to ensure that it examines such potential abuses of the system,” he said.
The market rigging concerns were first reported by Utility Week last month after industry sources pointed out a regulatory loophole which could allow generators to inflate market prices before National Grid’s reserve capacity can be used.
Bloomberg analysis of the 4 November capacity crunch later showed that Calon began to reduce output from its plant in the mid afternoon after National Grid issued its first Notice of Inadequate Supply Margin (NISM) since 2012, but then agreed to return the unit during peak demand hours for a price of £2,500/MWh.
Calon Energy said its Severn power plant “was contracted to run until 3pm. Accordingly, at 3pm it started to ramp down as is consistent with normal market procedure”.
In addition a UK power trader told Utility Week that the generator acted within the rules and may well have maintained a balanced position throughout the afternoon.
The trader said that in some ways the generator was “helping manage the system”.
“If they are able to buy their plant back and not run it, then it leaves more plants able to respond. Ultimately gas units have to charge [high prices] to recover the optionality cost of their flexibility, and more and more people will do it as wind is not a reliable form of generation,” he said.
Ofgem told Utility Week that it cannot cannot say “whether we have had allegations made to us about this”.
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