Following a period of engagement with Ofgem, DWL, who generate electricity in Northern Scotland, will pay £5.53m into Ofgem’s Redress Fund, which takes payments from companies that have breached market rules and directs it into projects and schemes to support energy consumers in vulnerable situations.

This follows the announcement at the end of last year that Ofgem has secured over £100m in payments from companies who have breached market rules so far since the Redress scheme began.

On this occasion, following a review carried out by Ofgem, DWL has accepted it breached one of its licence conditions. Ofgem considers that DWL charged excessive prices to reduce output where this was required to keep the system balanced and the breach pushed up costs for consumers. Ofgem’s review found that:

• DWL’s prices did not properly reflect the financial benefits of reducing its output related to avoided payments that otherwise would have been required by the Government’s Contracts for Difference scheme.
• Some of the assumptions used by DWL when setting its prices likely led to it recovering more than was necessary to cover the costs of reducing its output.

Director of enforcement for Ofgem, Cathryn Scott, said: “Another win for customers through Ofgem’s robust enforcement work has been secured.

“This company has accepted its error and has agreed to make a significant payment to put it right.

“Customers – particularly those in vulnerable situations – will rightly benefit from over £5m as a direct result.

“We hope this sends a clear message that licence breaches will simply not be tolerated.”

Since 2020, DWL has regularly been required to reduce its output due to the physical limits of the transmission system which restrict the amount of power which can be moved from the wind farm’s location in the North of Scotland to demand centres further south. Market rules prohibit generators from charging excessive prices in such circumstances, helping to keep consumer bills down.

Whilst DWL now accepts Ofgem’s position that its approach was not compliant with the relevant licence condition, DWL has told Ofgem that at the time of submitting the bid prices, it had considered that it was compliant. DWL has co-operated fully with Ofgem in its enquiries to resolve the issue quickly and fairly.

Since Ofgem’s review, DWL has committed to making changes to its bid pricing policy to ensure a breach does not happen again and agreed to make a payment into the Redress Fund in respect of the breach. DWL maintains that the breach was not deliberate and was not in any way motivated by the intention to obtain an excessive benefit.

This is the fourth action that Ofgem has taken against electricity generation companies since the start of 2023 in relation to breaches of licence conditions. Other cases were:

• Drax Pumped Storage Limited (£6.12m paid into the Redress Fund)
• SSE Generation Limited (£9.78m paid into the Redress Fund), and
• EP SHB Limited (£23.63m paid into the Redress Fund)

The regulator has been clear that electricity generators must put in place controls to ensure that their prices are set in a way that ensures that they do not obtain excessive benefits during the periods where they are required to reduce output due to the limitations of the transmission network. If they fail to do so, they should expect to face large penalties.

Taking into account DWL’s acceptance of the breach, the steps it has taken to avoid future reoccurrence of a breach and the redress it has agreed to pay, Ofgem has now closed this matter without the need for a full investigation.