Market Manipulation Leads To BSUoS Refunds
Back in April of this year, Ofgem published their findings from an investigation launched in May 2017 into InterGen, the owner of four power stations in the UK.
The investigation found that InterGen staff had 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 electricity during the time when demand was highest. They also found that the company had deliberately sent misleading signals to the market about its power plants’ capabilities.
As a result of the misleading information, Ofgem found that National Grid paid the company high prices to generate electricity during the periods where the manipulation took place.
These inflated prices paid by National Grid led to higher Balancing Services Use of System (BSUoS) charges. BSUoS charges are paid by market participants to cover the costs of balancing the UK electricity system – for example; running the national control room, frequency response arrangements, other ancillary services and constraint costs (paying generators to turn on or off to maintain system security).
BSUoS Refunds
In addition to a fine of £35m (which was reduced to £24.5m as InterGen was eligible for a discount after admitting the breaches and taking responsibility for its actions), Ofgem also demanded InterGen to pay back the £12.8 million they were found to have made through the manipulation of the market. Ofgem also required this money to be used to recompense those affected.
Due to the timing of the investigation and fine, standard reconciliation methodologies for returning the funds to affected BSUoS parties were not available and hence, an offline methodology was developed, as detailed in National Grid’s recent publication here.
The £12.8m was distributed in 5 separate values across a series of different settlement periods and has now been returned to the affected parties.
So what does all this mean for UK plc?
Well, many UK businesses choose to enter into so called ‘pass-through’ electricity contracts whereby their non-commodity charges are priced on a one-to-one basis to how the electricity suppliers are charged.
BSUoS is often included as one of these pass-through charges. Therefore, if your business had a ‘pass-through’ type electricity contract in place during the affected periods, it’s likely that you were indirectly impacted by the market manipulation and you could be due some of the £12m restitution payment.
As the restitution payments were distributed via a bespoke methodology to BSUoS Parties (e.g. Suppliers), we cannot provide an exact figure for what might be owed back to businesses who had ‘pass-through’ electricity contracts at the time of these events. However, here at Captrics we have made an estimate to provide some approximate numbers.
By calculating the percentage the net restitution payments represent of the original total net BSUoS recovered, we can get an approximate value for the refund that a business may be eligible to as a percentage of what BSUoS they originally paid during these periods.
Date | Time From | Time To | Restitution Payment Net Amount (1) | Total BSUoS Charges (2) | Approx. % of Charges Refunded |
|---|---|---|---|---|---|
31/10/2016 | 13:00 | 17:00 | £2,293,379.88 | £6,975,566.40 | 33% |
07/11/2016 | 11:00 | 16:30 | £5,619,818.90 | £10,554,650.85 | 53% |
08/11/2016 | 09:00 | 11:00 | £146,207.20 | £587,663.39 | 25% |
08/11/2016 | 11:00 | 16:00 | £2,119,048.67 | £7,217,699.72 | 29% |
15/11/2016 | 11:00 | 15:00 | £480,857.15 | £1,311,432.45 | 37% |
(1) Assumes a VAT rate of 20%
(2) Aggregate of BSUoS RF Charges for the Settlement Periods as published by National Grid ESO.
A BSUoS Stocking Filler?
So how much could this be worth to a UK business?
As a guide, we have calculated an approximate value for a UK business that had a contract with ‘pass-though’ BSUoS charges for the period in question. Here are our estimated numbers for a business with an average consumption of 1MW (500kWh per half hour) during the period:
Date | Time From | Time To | Est. Original BSUoS Costs (1) | Approx. Refund % | Est. Refund Due |
|---|---|---|---|---|---|
31/10/2016 | 13:00 | 17:00 | £98.49 | 33% | £32.38 |
07/11/2016 | 11:00 | 16:30 | £134.57 | 53% | £71.65 |
08/11/2016 | 09:00 | 11:00 | £7.15 | 25% | £1.78 |
08/11/2016 | 11:00 | 16:00 | £88.96 | 29% | £26.12 |
15/11/2016 | 11:00 | 15:00 | £17.39 | 37% | £6.38 |
Total | £138.31 |
(1) Based on BSUoS RF Charges for 500 kWh per half hour.
£138 Might not be a substantial sum for a business consuming 1MW of electricity. However, for the sake of an email to your energy supplier, surely it’s worth seeing if the refund you could be due is enough for one more stocking filler?!
