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Firms fined over energy saving miss

Two power generation firms are to pay penalties totalling £39 million following their failure to deliver energy saving measures to low-income households.

Regulator Ofgem said it has secured a record £28 million payment from North Yorkshire-based Drax Power for not meeting targets under the government's Community Energy Saving Programme (CESP).

Under the scheme, generators as well as energy suppliers had to deliver energy saving measures to households in low-income areas by the end of December 2012.

Drax Power delivered just 37.1% of its carbon emissions reduction target, leading to several thousand households in some of the most deprived areas in Britain missing out on energy saving measures which would have helped lower bills.

Ofgem also handed a penalty of £11 million to generator InterGen after it delivered 61.2% of its required energy saving measures to around 2,200 households by the end of May 2013.

Ofgem is now considering how the penalties can be used to benefit the consumers for whom the scheme was intended.

In the case of Drax, the company said £20 million will benefit vulnerable energy consumers through the charity National Energy Action, with the remaining £8 million to be paid as a fine or as further consumer redress.

Investigations into four other energy companies who failed to deliver their obligations under the CESP scheme are still ongoing.

Drax said it was deeply disappointed by the scale of the fine and said independent generators should not have been part of CESP because of their lack of experience in the delivery of energy efficiency schemes and absence of any direct relationship with domestic electricity customers.

The company outsourced its CESP obligation to a third party provider against whom it said it has since settled an action for breach of contract.

Drax chief executive Dorothy Thompson said: "We are deeply disappointed with the magnitude of the fine. However, we believe it is in our shareholders' interests to settle this matter and, as the nation's single largest power provider, focus on delivering a reliable supply of electricity this winter.

"Our core competence is in electricity generation and that is the best way for us to serve the needs of the UK in terms of carbon savings.

"Through undertaking the largest decarbonisation project in Europe, Drax will deliver carbon savings of around 12 million tonnes a year through burning sustainable biomass in place of coal."

InterGen has 11 power plants in the UK, the Netherlands, Mexico and Australia, including at Coryton in Essex, Spalding in Lincolnshire and Rocksavage in Cheshire.

Ofgem also confirmed spending plans for five out of the six companies that run Britain's local electricity network.

The ruling will allow the companies to spend around £17 billion to renew, maintain the electricity network and connect small-scale renewable generation.

Alongside Western Power Distribution, which had its price controls agreed early, the total spend on Britain's local electricity network over the next eight years will be £24 billion.

Ofgem said there have been minimal changes since a draft decision in July represented a reduction of £2.1 billion on initial business plans last November.

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