Ofgem fines power firms over missed energy efficiency targets

Under the Government's Community Energy Saving Programme (CESP), energy suppliers had to lower carbon emissions and help deliver energy saving measures to households in low-income areas by the end of December 2012 to keep homes warm and lower users' bills.

But Scottish Power only delivered 70% of its obligation and as a result, energy regulator Ofgem has today announced it has fined the supplier £2.4 million. SSE, meanwhile, achieved 90.9% of its target and has been hit with a penalty of £1.75 million. And energy generator GDF SUEZ/IPM achieved 38.6% of it's energy saving obligation, resulting in a £450,000 fine by Ofgem.

The combined total of £4.6 million will go towards charities and funds that will benefit vulnerable customers (join our free Cheap Energy Club to check if you can switch and save).

Ofgem says Scottish Power's failure to meet its CESP target meant that several thousand households missed out on energy efficiency measures during the cold winter of 2012/13. The company made up the 30% shortfall by April 2013.

Management were aware at the end of 2011 that the company could fail to meet its target but Ofgem says budget increases for CESP schemes were made too slowly.

SSE's failure to meet its target on time meant the equivalent of 2,100 households missed out on energy efficiency measures. It made up the shortfall by May 2013 and ensured that around 346 more homes received energy efficiency measures than required.

And with GDF SUEZ/IPM, failure to meet its reduced target meant around 1,000 households missed out on energy efficiency measures during a cold winter.

Under the CESP framework, energy companies were allowed to trade/buy some of their obligation, so GDF SUEZ/IPM had paid to trade part of its target, however it still achieved only 38.6% of the reduced target.

£55 million secured for missed targets

The regulator has now secured £55 million including today's penalties from six companies due to their failure to meet both CESP and a separate Carbon Emissions Reduction Target (CERT).

Just last week, Ofgem fined British Gas £11.1 million over its failure to deliver energy efficiency measures and at the end of November power generation firms Drax Power and InterGen were fined a total of £39 million over carbon emissions failures.

Sarah Harrison, Ofgem's senior partner with responsibility for enforcement, says: "Scottish Power 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."

On SSE, Harrison adds: "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."

What do the energy providers say?

Neil Clitheroe, CEO of retail and generation at Scottish Power, says: "By the end of 2012 we had managed to contract for 100% of the obligation but had only physically delivered 70% 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."

Will Morris, group managing director of retail at SSE, says: "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.

"The settlement we have agreed with Ofgem today will go directly towards helping those most in need. We have learned from this process and are now working hard to ensure that our current obligations under ECO [Energy Companies Obligation, the programme introduced in 2013] are delivered on time."

A spokesperson from GDF SUEZ/IPM says. “GDF SUEZ/IPM met the majority of its total obligation through trading contracts with other obligated parties. In addition it delivered 38.6% of the remaining obligation by the deadline in December 2012, and took prompt action to deliver the shortfall in full within three months. The shortfall followed a key contractor not delivering on its requirements.”

Additional reporting by Paloma Kubiak