Ofgem requires InterGen to pay £37m over energy market abuse

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  • InterGen sent misleading signals to National Grid in 2016 about how much energy it would supply during peak winter hours to make a substantial profit.
  • Breaches demonstrated weaknesses in InterGen’s procedures, management systems and internal controls with respect to REMIT compliance.     
  • Ofgem places large penalty on InterGen to send strong message that it will not tolerate such market manipulation.

Ofgem has imposed payments amounting to £47.8 million (reduced to payments of £37.2m after settlement discount on the penalty levied) on InterGen after an investigation found that InterGen sent misleading signals to National Grid Electricity System Operator (1) in winter 2016 about the energy it could supply to make substantial profits.

In May 2017 Ofgem launched an investigation into InterGen, which owns four power stations in the UK, following an alert from another market participant that was suspicious of  activity it had observed in the market in October/November 2016.

Ofgem’s investigation found that InterGen staff manipulated the market during four days in winter 2016, when they deliberately sent misleading signals to National Grid by falsely claiming that some of its power stations would not be generating during the critical ‘darkness peak’ evening period when demand is highest. To boost profits even further, the company also deliberately sent misleading signals to National Grid about its power plants’ capabilities.

The data submitted by power generators like InterGen is crucial to enabling National Grid to balance supply and demand, maintaining the security of Britain’s energy supply and ensuring the lights stay on.

At the time of the market abuse, the margins between electricity supply and demand were very tight, signalling a potential shortage. The misleading signals provided by InterGen staff made margins appear even tighter and pushed National Grid into spending money in the balancing mechanism that it did not actually need to. The balancing mechanism is a market used to balance supply and demand on a half-hourly basis. It typically commands much higher prices than forward markets.

As a result of the misleading information provided by InterGen staff, National Grid paid the company high prices to generate electricity during those hours.

Ofgem’s investigation found that staff at InterGen deliberately sent misleading signals to National Grid for commercial gain. Ofgem found that InterGen made £12.8 million through its manipulation of the market. The investigations also uncovered weaknesses in InterGen’s procedures, management systems and internal controls with respect to REMIT compliance. InterGen could have done more to ensure that better systems and controls were in place in order to put the right safeguards in place to stop the abuse happening. InterGen agreed to pay this money back to recompense those affected by its REMIT breach, in addition to paying a penalty of £24.5m.  

Ofgem found InterGen’s behaviour breached the Grid Code and Article 5 of the European REMIT Regulations, which require generators to take every step to give accurate information and bans them from misleading the market about their wholesale energy products.

Ofgem acknowledges that InterGen co-operated  with the Authority’s investigation and has subsequently put in measures to ensure this does not happen again. Following the investigation InterGen put in place additional training, overhauled its own surveillance measures and had extrenal auditors verify their process to prevent anything like this happening again. InterGen has shown genuine remorse and a desire to put things right.  By settling this investigation early, InterGen has qualified for a 30 per cent discount for early settlement from a proposed approximate payment of £47.8 million, meaning that actual total liability, including redress, is approximately £37m. (2)

Jonathan Brearley, chief executive of Ofgem, said: 

“InterGen misled National Grid system operator into paying millions more than it needed to for electricity generated by the company. This strong action sends a signal that Ofgem will not tolerate any form of market abuse that undermines the integrity of the wholesale market that can ultimately harm consumers”.

Notes to editors

For more details see our finding that InterGen has breached Article 5 (prohibition on market manipulation) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (‘REMIT’).

  1. National Grid: Electricity System Operator (NGESO) is the arm of National Grid responsible for balancing supply and demand for the UK electricity system. It is referred to as ‘National Grid’ throughout the rest of this press release.
  2. The payments demanded of InterGen comprise a restitution payment of approximately £12,791,000, so that InterGen pays back the money it achieved through its manipulation and recompenses those affected by its REMIT breach. Ofgem is also imposing a penalty/fine of £35,000,000.  As InterGen has admitted the breaches and taken responsibility for its actions it is eligible for a 30% discount on the penalty which reduces it from £35,000,000 to £24,500,000. The overall sum to be paid by InterGen comprises the money to be paid back (£12,791,000) plus the penalty (£24,500,000), which totals £37,291,000. The settlement discount is only applied to the penal element of the fine. The £12.8m restitution payment is to be paid in full with no discount.

For further information

Media contacts

Contact Ofgem media manager, Ruth Somerville:

Tel – 0207 901 7460 / 07928 829 894

Email – ruth.somerville@ofgem.gov.uk

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