Drax Group to pay £28m Ofgem penalty

28th Nov 2014 08:11

Drax Group, the owner and operator of a large power coal-fired station in North Yorkshire, has been ordered to pay a windfall settlement to energy regulator Ofgem.The power station owner was fined for failing to meet environmental obligations in the Community Energy Saving Programme set out by Ofgem.As a result, Drax will pay a total settlement of £28m, £8m of which will be paid as a fine directly to Ofgem while the remaining £20m will be used to benefit vulnerable energy consumers.According to Ofgem, generators and energy suppliers were expected to deliver energy saving measures to low-income households by the end of December 2012. However, Drax delivered just 37.1% of its expected carbon emissions reduction target and consequently thousands of households in deprived areas of Britain missed out on energy cost reductions.A total of 10 energy companies were obliged to follow the Community Energy Saving Programme, six of which did not deliver their targets."Ofgem found that senior management at Drax were aware of the serious risk of non-compliance with the Community Energy Saving Programme 18 months before the end of the scheme," Ofgem said in a statement."While Ofgem has taken into account Drax's inexperience in delivering energy efficiency measures to consumers and its lack of a customer base, the company could have taken more timely action to reduce the risk of not delivering its obligation. In addition, after the deadline passed, Drax made no attempt to mitigate the carbon saving shortfall."Drax chief executive Dorothy Thompson responded by saying the group was "deeply disappointed with the magnitude of the fine"."However, we believe it is in our shareholders' interests to settle this matter and, as the nation's single largest power provider, focus on delivering a reliable supply of electricity this winter," she added."Today's agreement to pay £28m reflects the seriousness of the consequences of these failings for consumers."As of 9:03, Drax's share price had risen 0.16% to 607.50p per share.