£158 million redress for two-year delay to major ‘Western Link’ subsea cable

30 Nov 2021 10:43 AM

National Grid Electricity Transmission plc (NGET) and Scottish Power Transmission plc (SPT) have agreed to pay a redress package of £158 million for delays to the Western Link Project, following an investigation by Ofgem, the energy regulator.

£15 million of the redress package will be paid into Ofgem’s Redress Fund. This is operated on its behalf by the Energy Saving Trust and allows companies to pay a sum of money to appropriate charities, trusts, organisations or consumers as a result of breaches of licence conditions. The remainder of the redress package will be returned via reduced system charges. (1) These charges are ultimately paid for by consumers as part of their overall electricity bills, so consumers will benefit from this redress package through lower bills.

Ofgem recognises that consumers have benefited by a further £100 million because of the companies’ financial management of the project and their contract management strategy. Ofgem’s network price control ensures this is returned to customers through lower system charges.

Western Link is a transmission project worth around £1.2 billion, providing a major subsea electricity link between Scotland and Wales. The link was designed to transport electricity, often from green sources like offshore wind, between Scotland and Wales. It provides an additional 2,250MW of capacity, equivalent to powering over two million homes, and is crucial to helping Britain reach its targets of net zero greenhouse gas emissions (2).

The two-year delay restricted renewable generators in Scotland exporting electricity to England and Wales, because at times there was not enough capacity to do so. 

Because renewable generators in Scotland were unable to transport the energy they were generating, National Grid ESO would have sometimes had to reduce the output from windfarm generators to protect the electricity system. This ultimately led to higher costs for consumers.

NGET and SPT own the licence for the project and contracted with a contractor to deliver it. The link fell two years behind its expected delivery date of March 2017 to June 2019.

Ofgem’s investigation found that the root causes of the delay were problems with manufacturing processes, installing the cables and commissioning tests. It acknowledged that NGET and SPT did not cause or exacerbate the delay.

Ofgem holds NGET and SPT ultimately responsible, as licence holders, for the delay caused by their supply chain.

Cathryn Scott, Ofgem’s Director of Enforcement and Emerging Issues, said:  

“To deliver the UK’s climate change ambitions, more of our electricity will come from renewable generation. This is already happening, with offshore wind and other projects in development. Innovative projects such as the Western Link are vital in moving clean energy from where it’s produced to where it’s needed.

“However, they must be delivered on time and to the standards agreed. Where they are not, as the energy regulator, we will hold the licensees accountable."   

Notes

  1. In addition to the £15m payment to the Redress Fund, Ofgem is utilising mechanisms under its network price control to reset NGET’s and SPT's allowances received for WHVDC to equal actual expenditure. This will return to consumers the overall underspend on the WHVDC project, any cashflow benefit of receiving allowances ahead of the delayed expenditure, and the Liquidated Damages payments received from the supply chain. This represents a proportionate overall financial package for energy consumers.
  1. Links such as this are essential for Britain to reach its net zero emissions targets. The link is 422 km (262 miles) long, of which 385 km (239 miles) is under water.

For media, contact Joss Wellings: 020 7901 1865

Media out of hours mobile: 0792 882 9894 (media calls only)

General enquiries (non-media)

If you are an energy customer looking for help and advice, including complaints about energy firms, please see our Household gas and electricity guide. Citizens Advice also provide a free, impartial helpline service across a range of issues on 0808 223 1133.

We also regularly share news and post general advice to help consumers get the most out of their energy services via our @Ofgem twitter and Facebook pages. If you have an enquiry or complaint relating to Ofgem’s policies or functions, contact us at consumeraffairs@ofgem.gov.uk or on 020 7901 7295.

For all other non-media related enquiries, please visit our Contact us page.

About Ofgem

Ofgem is Britain’s independent energy regulator. Our role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. We do this by:

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal.