OFGEM is consulting on National Grid’s request to recover the costs of two contracts for grid services that it agreed with SSE (for the Fiddlers Ferry power station) and Drax following a tender process. The contracts are worth £113 million in total.
These services refer to the ability of certain generators to start up and provide electricity to the transmission system without an external power supply (commonly referred to as “Black Start”). This is an insurance policy for the unlikely event that National Grid needs to re-energise the transmission system.
Traditionally coal-fired power stations provided Britain with this capability, but the economics of running these plant have changed. This means they are available less frequently than before.
OFGEM set National Grid a cost target for these services but National Grid spent significantly more money than the agreed target.
So National Grid has applied to OFGEM to recover all of these costs from generators and suppliers through the ‘Income Adjusting Events’ process.
When making a decision on this OFGEM has powers to disallow some or all of the expenditure on these contracts if it judges that the case for recovering the money has not been met.
An SSE spokesman said: “SSE’s tender reflected the costs associated with Fiddler’s Ferry providing the Black Start services required by National Grid. The competitive tender process is a matter for them.”