Ofgem closes investigation into Drax Power Limited

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Generation and Wholesale Market
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RO

On 31 May 2023, Ofgem opened an investigation into whether Drax Power Limited (“Drax”) was in breach of annual profiling reporting requirements relating to the Renewables Obligations (“RO”) scheme and other related matters.

The investigation focussed on the data governance and controls Drax had in place to inform its reporting of profiling data to Ofgem in order to comply with its obligations under the Renewables Obligation Order 2015 (“ROO”). 

The investigation concluded that there was an absence of adequate data governance and controls in place that had contributed to: 

  • Drax misreporting data in relation to their annual profiling submission to Ofgem for compliance period 1 April 2021 to 31 March 2022 (“CP20”)
  • Drax being unable to provide Ofgem with sufficient evidence demonstrating how its CP20 annual profiling submission had been arrived at and unable to support the reliability of its profiling data reporting of forestry type and sawlogs for Canadian consignments for that same period 

Drax has engaged constructively with the case team during the investigation and will continue to engage with Ofgem in this regard following closure of the investigation and   as a result:

  • Drax has accepted the findings of the investigation.
  • Drax is submitting a payment to Ofgem’s Energy Industry Voluntary Redress Fund in the amount of £25m.
  • Drax has agreed to re-report their CP20 annual profiling submission in respect of forestry type and saw log proportions.
  • Drax has confirmed it has updated its policies and procedures around the reporting requirements relating to data profiling under the RO; however, it will commission an independent external audit of the profiling data from its international supply chain and its profiling data reporting for the compliance period 1 April 2023 to 31 March 2024 (referred to as CP22). This audit will cover 98% of Drax’s supply chain. Ofgem will hold Drax accountable for the delivery of this audit which aims to provide Ofgem with the assurance of the accuracy of its future reporting. The findings of the audit will be published. 

Annual profiling data is the reporting of ‘additional biomass characteristics’ and is not used for the issuing of ROCs.  During this investigation, Ofgem did not find any evidence to suggest that Drax have been issued with ROCs incorrectly. The investigation did not find any evidence suggesting that Drax does not meet the government’s threshold that a minimum of 70% of biomass must come from sustainable sources in order to receive scheme funding.  

Ofgem’s full case closure statement is available here: Ofgem investigating Drax Power Limited's compliance with reporting requirements relating to the Renewables Obligation | Ofgem 

Ofgem Chief Executive Jonathan Brearley said:  

“This has been a complex and detailed investigation. Energy consumers expect all companies, particularly those receiving millions of pounds annually in public subsidies to comply with all their statutory requirements. 

“There are no excuses for Drax’s admission that it did not comply with its mandatory requirement to give Ofgem accurate and robust data on the exact types of Canadian wood it utilises. The legislation is clear about Drax’s obligations – that’s why we took tough action. 

“Drax has accepted that it had weak procedures, controls and governance which resulted in inaccurate reporting of data about the forestry type and sawlog content being used. It has agreed to make a significant payment of £25m to our voluntary redress fund and carry out an independent external audit of its global profiling data reporting. 

“This report will be submitted to Ofgem for our independent assessment and findings published, so the conclusions are fully transparent. While Ofgem currently has no reason to believe there have been further instances of non-compliance we won’t hesitate to act if required.”