National Grid Company could face fines of up to £12m a year for major power cuts as the result of an incentive scheme announced this week by Ofgem.
The decision to introduce the scheme comes after an investigation into power cuts in London and Birmingham in 2003. The regulator blamed poorly installed equipment for the blackouts but did not impose a fine because NGC had not breached its legal obligations.
The scheme will enable NGC to earn up to £8m a year for improving performance on the National Grid. There will also be fine exemptions for blackouts cause by exceptional events, such as severe weather.
Ofgem chief executive Alistair Buchanan said: “It was clear from our investigation into the London and Birmingham power cuts that strengthening the incentives on NGC to maintain and improve the performance of the National Grid would help protect customers’ interests.
“Under the new incentive scheme, NGC could face penalties of over £10m if we were ever to see a repeat of the blackouts in London and Birmingham in 2003.”
