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Stronger penalty regime set by Ofgem to secure gas supplies

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Higher penalties will be faced by gas shippers if they fail to deliver in a supply emergency, under revisions made to the ‘cash out’ regime announced by Ofgem on Tuesday.

If domestic customers have to be cut-off, suppliers will be made to repay to them £14/therm. The figure equates to £30 a household for an average winter’s day, which was reduced from £20/therm in response to concerns from shippers. Cash-out payments will no longer be frozen in emergencies.

Ofgem is consulting in a demand side response (DSR) tender in which large industrial customers could receive payments to accept an interruption in their supply in emergencies.

“Although Britain has never had a serious gas supply shortage and the risk of it happening is low, we still need to stronger incentives to secure gas supplies,” said a spokesman for Ofgem. “Our gas security of supply report to Government last year showed that we will be increasingly reliant on gas imports.”

High-level principles of the DSR tender are due to be published by Ofgem, and they are due to consult on updated licence conditions for cash-out early next year.The reforms are aiming to be implemented by the winter of 2015/16.




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