Ofgem fines energy generators Drax and Intergen £39m for not delivering on Cesp target

Ofgem has fined energy generators Drax and Intergen £28 million and £11 million respectively for failing to meet environmental targets under the government’s community energy saving programme (Cesp).

Drax Power only delivered 37.1 per cent of its Cesp target by 31 December 2012 while Intergen delivered much less at 6 per cent of its targets, meaning several thousand domestic customers missed out on energy saving measures such as loft and cavity wall insulation and had higher energy bills as a result, Ofgem said.

Cesp was designed to lower carbon emissions through the delivery of these energy saving measures free of charge to households in low income areas by both energy suppliers and generators.

In May 2013, Ofgem launched investigations into six energy companies who failed to deliver their obligations by the deadline, of which Drax was one.

The payments to Ofgem “reflects the seriousness of the consequences of these failings for consumers” Ofgem said. 

Intergen’s payment is lower than that for Drax because it took steps to mitigate its shortfall, delivering a further 61.2 per cent of its target by the end of May 2013.

Ofgem said a “significant factor” in the payment decision was that despite senior management at Drax being aware 18 months ahead of the 31 December 2012 deadline that the company was not going to meet its target, the company made no attempt to lessen its shortfall after the deadline.

Both Drax and Intergen said in response to the fines that they thought the Cesp scheme was “flawed”.

Drax said it had voiced concerns from the outset that it lacked the relevant experience and did not have a direct relationship with customers. It said it felt it had no choice but to outsource to a third party provider, which failed to fulfil its contract.

Drax is now working with National Energy Action to develop a package of up to £20 million of consumer redress proposals to benefit the consumers CESP was designed for. The rest of the £28 million will be paid to Ofgem as a fine or as further consumer redress measures.

Drax chief executive Dorothy Thompson said: “We take our statutory obligations very seriously and in the case of the CESP we always sought to maintain a compliant position.”

“We are deeply disappointed with the magnitude of the fine.”

Ofgem found Intergen had not put in place schemes quickly enough to enable it to meet its target by the deadline.
Intergen will pay its fine in the form of charitable donations to appropriate organisations supporting energy efficiency, carbon reduction and fuel poverty.

InterGen’s European general manager, Mark Somerset said “We regret that we could not fulfill our CESP obligation but we believe the scheme design was deeply flawed and not cost-effective for consumers.”

“The implementation of CESP has damaged investor confidence in the sector and undermined wholesale market competition as a result of its disproportionate effect on independent generators who – unlike the large energy suppliers – were unable to pass the costs of CESP installation measures through to domestic consumers in their electricity bills.”

Citizens Advice chief executive, Gillian Guy said: “These firms have deprived poor households of savings on their energy bills. Instead the companies obtained an advantage for themselves.”

“Firms must not benefit financially from failure to meet their responsibilities and Ofgem is right to hand out serious penalties.”