Ofgem has noticed that energy companies have been able to make huge profits by manipulating the energy market. This has led to some companies being able to make billions.
Energy generators will usually warn the Electricity System Operator (ESO) that they are going to be turning power plants off when demand meets its peak and offer to keep them running in return for balancing payments.
This led the ESO to have no choice but to make payments above the market price on numerous accounts in order to keep power plants on to avoid the risk of winter blackouts.
This leads to the national grid having to pass balancing payments onto energy consumers in the form of higher energy bills, which adds up to millions of pounds for consumers.
Ofgem is currently trying to introduce a new rule for companies that generate electricity to prohibit them from being able to manipulate balancing payments as this is not in consumers’ interests, especially as so many households and businesses are struggling to pay energy bills.
Companies that own power plants were more likely to use this manoeuvre when market prices were already higher and demand was outweighing supplies, this would then put further pressure on electricity suppliers, forcing the ESO to have to make balancing payments.
How has this been affecting energy bills?
With wholesale energy prices being higher over the past couple of years, people’s bills were already affected due to issues affecting the global energy market, such as the war in Ukraine. Energy generators have only made situations worse for a lot of consumers as they put a further strain on supplies leading to higher prices.
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