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Ofgem Act Again on CESP

In quick order following the fining of Intergen, Drax and British Gas for their failures under the Community Energy Savings Programme (CESP) scheme, Ofgem have again acted.

This time it is GDF Suez, SSE and Scottish Power who are in the firing line.

Under CESP, electricity generators as well as the energy suppliers were required to deliver “energy saving measures” such as loft and cavity wall insulation free of charge to households in “low-income areas” by the end of December 2012.

The overall CESP target was 19.25 million lifetime tonnes of carbon dioxide (Mt CO2). Against this all energy companies (including generators) achieving 16.31 Mt CO2 (84.7%).

The energy suppliers achieved 92.4%.

As a result in May 2013 Ofgem launched investigations into six energy companies who failed to deliver on time their obligations under CESP leading to this shortfall.

With British Gas fined £11m for their shortfall earlier this month, Big 6 energy suppliers Scottish Power and SSE as well as French state owned GDF Suez were next in the dock.

GDF Suez: Fined £450k

  • GDF Suez delivered 38.6% of its total obligation in the time available.
  • GDF Suez had already ‘traded’ away 562,295 tCO2 of its 852,080 tCO2 total as was permitted under the scheme.
  • Yet GDF Suez delivered just 38.6% of this reduced obligation of 289.785 tCO2
  • Ofgem found that the risk of non-delivery would have been reduced if GDF Suez had taken a “more proactive approach” to project management

Announcing the decision Sarah Harrison, Ofgem’s Senior Partner in charge of Enforcement said:

“GDF SUEZ/IPM’s late delivery meant low income households missed out on energy saving measures during the early months of 2013, where consumers experienced a particularly cold winter. Our fine today reflects these factors but also the prompt action taken by GDF SUEZ/IPM to make up its shortfall.”

SSE: Fined £1.75m

  • SSE delivered 90.9% of its total obligation in the time available.
  • Ofgem found that SSE’s management had inadequate plans in place to ensure that SSE would deliver its obligations on time
  • Ofgem found that SSE was slow to increase its budget when it was alerted to the discrepancy between their forecast and actual cost of delivery
  • Ofgem found that SSE did not put measures in place to meet its full obligations by the deadline.
  • Ofgem recognised that SSE made a decision to deliver the remaining CESP measures after the deadline and that these installed energy efficiency measures over-delivered its obligations.
  • Ofgem noted SSE’s co-operation enabled a quicker resolution to the investigation and without this the level of penalty would have been higher.

SSE Group Managing Director of Retail, Will Morris said:

“Having worked very hard to deliver what was a very challenging and complex scheme, and having successfully delivered over 43,000 measures to over 21,000 homes by 31 December 2012, we are very sorry we did not meet our target in full by the deadline.

“We have learned from this process and are now working hard to ensure that our current obligations under ECO are delivered on time.”

Whilst Harrison commented:

“A key consideration for Ofgem during the investigation was the consumer impact. SSE’s failure to deliver energy efficiency measures on time meant that over 2,000 households missed out on measures like insulation during the early months of 2013, where consumers experienced a particularly cold winter.

“Our action today is a clear signal that failure to deliver environmental obligations on time is not acceptable. By agreeing to make the payment to charities, Ofgem and SSE are ensuring that this money is targeted to energy customers who need it most.”

Scottish Power: Fined £2.45m

  • Scottish Power delivered 70% of its total obligation in the time available.
  • Ofgem found that Scottish Power’s senior management did not take appropriate action to ensure it delivered energy efficiency measures on time.
  • Ofgem found that although Scottish Power’s management were aware that the company could fail to meet its target at the end of 2011, budget increases for CESP schemes were made slowly.
  • Ofgem noted that after failing to meet the deadline, Scottish Power continued to deliver energy efficiency measures to consumers and fully mitigated over-delivering by 2%.

Scottish Power’s CEO of Retail and Generation, Neil Clitheroe said:

“By the end of 2012 we had managed to contract for 100 per cent of the obligation but had only physically delivered 70 per cent of our target. The shortfall was delivered by the end of April 2013, and we then continued to deliver measures in excess of our obligation. When completed, our Cesp scheme benefited approximately 20,000 families.

“Although we are disappointed with Ofgem’s enforcement decision, we fully co-operated with the investigation and agreed to settle the matter as quickly as possible.”

Harrison reiterated:

“ScottishPower clearly missed its target by the required deadline disadvantaging many households. Today’s redress package sends a clear message to the energy industry that late delivery of obligations is unacceptable.”