Intergen, the global power generation firm, has been hit with a £37.2 million fine. This comes after they were found guilty of manipulating the market in winter 2016. Intergen has been a part of the UK’s power system for over 20 years.
Ofgem’s investigation and the results
The fine comes after a 3-year investigation from Ofgem. It was discovered that Intergen, which runs several gas-fired power stations in the UK including Coryton, Spalding, and Rocksavage, had manipulated the system and profited from the thin capacity margins.
In its investigation, Ofgem found evidence that showed that there was manipulation carried out for over 4 days. During this, their staff knowingly sent false signals to the National Grid and claimed that a few of its power stations will not be able to generate electricity during the time of peak demand. This is the ‘darkness peak’, a critical evening period when the electricity demand is the most. In addition to this, the company also sent false signals to the National Grid regarding the capabilities of their power plants.
Due to these misleading signals, the National Grid had to pay a higher price to Intergen for ensuring that supply was not interrupted. Power generators such as Intergen submit this data to the National Grid. The National Grid then uses it as a basis for balancing demand and supply to ensure that there are no interruptions. This led to InterGen making an additional £12.8 million.
During the time of this manipulation, there were very thin margins between the supply and demand of electricity. These misleading signals from Intergen made the margins appear even thinner, leading the National Grid to spend more money then it was required too. Intergen received more money to generate electricity in those specific hours.
Initial discoveries and the fallout
However, the manipulation could not continue for long. Another power generator that was becoming suspicious of the firm’s activities raised the alarm, which led to the launch of an investigation. Due to these results, Intergen would not only be paying back the original £12. Million, but it would also have to pay a penalty of £24.5 million.
As per Ofgem, the company has now put in place measures and controls to avoid any such incidences in the future. It has shown genuine remorse and the will to rectify things. With this, the regulator decreased the penalty to £37 million from the earlier £47.8 million.
The investigation and its results have sent a strong message to the industry that Ofgem would not tolerate any type of manipulation or abuse of the market. An attempt to undermine the wholesale market integrity and harm the consumers would be dealt with most strictly.
Intergen’s response and what lies ahead
Jim Lighfoot, the CEO of InterGen, had issued a statement regretting and apologizing on behalf of the entire company for their former traders’ behavior. He stated that the company had overhauled all its systems and processes in 2016 to ensure no repeats. These efforts included increased training for compliance, modifying the management oversight and included processes, restructuring of the company, and ensuring that only experienced hires would be made part of their trading desk.
Christian Zinglersen, who is the Director of ACER, has welcomed this decision and hailed it as a benchmark as the regulator imposed the higher ever find for this REMIT breach. ACER guidance has been sharing examples of different trading practices that would fall under the category of market manipulation. This includes sending deliberately sending false or inaccurate signals in REMIT, an action that could increase the price at a level that cannot be justified by the market forces.
Even though the UK has a third country status after the Brexit day on 31 January 2020, the EU rules such as REMIT continued to be applicable. This is in place until 31 December 2020. After this, as per an announcement from Ofgem, UK’s national laws would take over to ensure transparency and integrity of the wholesale energy segment.