A surge in balancing costs as Covid-19 measures hit electricity demand has prompted Ofgem to launch a review.
The regulator said it wanted to identify “lessons that need to be explored further” in order to reduce future costs to consumers and is now looking for input from industry on the issue.
Ofgem said the balancing costs on the GB electricity system from March to July were £718m, 39% higher than the system operator had expected during the period.
“These costs increased at the same time as nationwide lockdowns changed consumer electricity consumption behaviour and reduced industrial activity,” said Ofgem in an open letter.
It said the period also saw high levels of renewables output at times, which required the ESO to take a “large number of actions to balance the system and ensure system operability”.
Those actions were charged to suppliers and generators via the Balancing Services Use of System (BSUoS) charges, which hit record levels.
“Given the high balancing costs incurred this summer, it is important that we understand in more detail what happened in this period and identify whether there are lessons for the ESO to learn to manage these kinds of issues in future,” said Ofgem.
It is planning to hold a series of virtual roundtables next month to get stakeholder views.
Meanwhile Ofgem has approved a reduction in the cap on BSUoS charges introduced as part of its Covid support scheme to £10/MWh and has extended the measure until 25 October. Any under-recovery of revenue from the application of the cap will be recovered in 2021/22.