Ofgem investigation into Scottish generation abuse claims

Ofgem announcement (1 page, PDF) that it will investigate allegations that Scottish electricity generators have abused a dominant position. According to this article in The Times, the allegations relate to high balancing mechanism payments to generators at a time where there was a shortage of power in Scotland due to scheduled plant outages (combined with the physical limitations of transmission capacity between England and Scotland).

Speculation, 17 April 2008: Ofgem's announcement is limited to allegations of “abuse of a dominant position in the electricity generation sector”. There is no allegation that ScottishPower and Scottish & Southern have in any way exchanged information to co-ordinate their prices or the outages that might have led to the supply shortage, or that their ownership of transmission networks has any relevance. Instead it seems that Ofgem wants to investigate the outage decisions that each company made individually, and the pricing strategies that each generator adopted once the unusual situation of a supply shortage had arisen.

For this to be characterised as an abuse of a dominant position, it seems to me that Ofgem would need to establish:

This interpretation would be consistent with Ofgem's previous comments on the relevance of exploitative abuse to allegations of overcharging in the balancing mechanism. Franck

Update, January 2009: Investigation abandoned by Ofgem.

For further information or advice please contact Franck Latrémolière.

Filed under Article 82, Electricity, Ofgem.

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