Ofgem addresses high prices and costs in the BM

Article summary

Ofgem has published its response to recent high prices and costs in the Balancing Mechanism (BM), following record breaking daily balancing costs of over £60m. Ofgem committed to monitoring activity in the BM and enforcing action where there is evidence of market participants acting outside of their obligations. Ofgem also highlighted plans to further explore various near-term interventions to enhance existing market arrangements and is considering options to ensure that the existing market arrangements are in consumers’ interests over the next few years, prior to any longer-term market reforms. The options will include introducing direct steps to restrict BM offer prices, limiting generators’ ability to change their schedules with no notice, amending the rules for how parties structure their BM bids, introducing new licence obligations that require generators to operate and behave in a way that delivers in consumers’ interests, and reducing BM access or BM bidding flexibilities for generation capacity that is withdrawn with...