Tough fines in event of power black out
The National Grid Company has been put on notice that it will face tough fines if there is a repeat of the 2003 power black outs.
Up to £12 million could be levied on the company in the event of a power supply failure – but there will be other financial incentives for good performance.
A power cut in August 2003 caused widespread chaos in London. Although it lasted only 37 minutes, the cut brought the Underground to a halt and extreme disruption to commuters. The following week, a power cut in Birmingham saw 200,000 people lose their electricity supply for 24 hours.
When Ofgem investigated the outages, it found that the National Grid Company had made mistakes, but they were not material enough for the company to be found in breach of its legal obligations.
Under the new incentive scheme, major power cuts could cost the NGC £12 million, but it could also gain an extra £8 million if performance improves.
Speaking this morning, Ofgem chief executive Alistair Buchanan, said: “Ofgem’s objective in designing this new incentive scheme is to strengthen the incentives on NGC to minimise interruptions to customers’ electricity supply. The scheme offers NGC an incentive to improve on the grid’s high standards of performance and complements its existing duties to operate the high voltage network in an efficient, co-ordinated and economical manner.”
He added: “It was clear from our investigation into the London and Birmingham power cuts that strengthening the incentives on NGC to maintain and improve the performance of the National Grid would help to better protect customers’ interests. Under the new incentive scheme NGC could face penalties of over £10 million if we were ever to see a repeat of the blackouts in London and Birmingham in 2003.”
The incentive scheme came into force at the beginning of January. In the event of a major power cut Ofgem would still investigate NGC to see whether there had been any breach of its legal obligations.
A spokesman for National Grid Transco, the parent company of the National Grid Company, welcomed the proposals saying they would benefit both the wider industry and consumers.
He added: “The losses of supplies in 2003 were regrettable but rare. We have dedicated ourselves to learning the lessons. We have an extremely good record for operating a reliable network, but are always looking to improve and build on it.”
