Ofgem boosts storm compensation, asks network power operators to gear up for winter

UK energy regulator Ofgem hiked the compensation for households and businesses that lose power as a result of severe weather events as it warned network power operators to be better prepared for the upcoming winter.

The announcement Sept. 1 came almost two years after storm Arwen hit the UK in late-November 2021, causing severe power disruptions across the country.

Network operators and power suppliers need to "get ready for the coming winter" and ensure that supplies are managed well in the face of extreme weather, Ofgem said.

"We will not hesitate to hold them to account if they fall short of the standards customers have a right to expect."

Storm Arwen saw nearly one million homes and businesses in the UK lose power in November 2021, with 40,000 consumers cut off for three days and almost 4,000 having to cope without power for over a week in parts of northern England and northeast Scotland.

"Lessons have been learnt by the industry following our review into Storm Arwen, but the frequency of extreme weather events is only set to increase, so we need to make sure network services are resilient," said Akshay Kaul, director general of infrastructure for Ofgem.

Ofgem increased the compensation cap for loss of supply due to severe weather to GBP2,000 from GBP700 and increasing the initial payment to GBP80 from GBP70.

"These changes will mean more customers will be entitled to higher levels of compensation to better reflect the impact of being cut off power for extended periods," Ofgem said.

The regulator recently conducted a review looking at the response by distribution network operators (DNOs), which showed these companies failed to follow rules and protect consumers' interests.

Last year, Northern Powergrid, Scottish and Southern Electricity Networks and Electricity North West agreed to pay a further GBP10.3 million in voluntary redress payments to the affected communities, after they had paid almost GBP30 million in direct compensation.

Extreme weather

Frequent wind swings and unexpected short cold snaps, especially in the European winter, have added more volatility to the power market already affected by French nuclear outages and high natural gas prices in the past few years.

Platts assessed the UK day-ahead baseload GTMA power price at GBP86/MWh Sept. 1, up from GBP71/MWh Aug. 1, according to S&P Global Commodity Insights data.

Extreme weather events are on the rise in 2023.

The EU's Copernicus Climate Change Service recently declared July 2023 as the hottest month on record, with severe heat waves and wildfires observed in the Northern Hemisphere.

The intensity and number of wildfires have been unprecedented this year with Canada, Russia, China all experiencing severe ones. Meanwhile, heat waves like those in Southern Europe struck in July and several South American countries and much of Antarctica also experienced above-average temperatures.

The World Meteorological Organization recently warned that global temperatures are likely to exceed 1.5 C above preindustrial levels for at least one year during 2023-2027 due to heat-trapping greenhouse gases and an El Niño event.

The El Niño climate phenomenon is used to describe the warming of sea surface temperature that occurs every few years, typically concentrated in the central-east equatorial Pacific Ocean.