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Ofgem’s minded-to position on addressing high balancing costs

On Friday 4 November, Ofgem issued a call for input regarding how high balancing costs should be addressed. The consultation follows an open letter that was issued in July 2022, in which the regulator produced a shortlist of six options, including a price cap on BM offer prices and changes to bid/offer structures.

These options were considered against four criteria measures, such as compatibility with existing market design, against which Ofgem has chosen its preferred approach as option four, which would introduce a new condition to the electricity generation licence to prohibit generators from gaining excessive benefit in the Balancing Mechanism (BM) after they have reduced their Physical Notifications (PN) to zero. Responses are requested by 5 December 2022.

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