Have the events of 23 June exposed failures in Ofgem’s approach to regulation?

The ongoing drama about GB electricity grid security on 23 June is exposing much wider problems than expected.

To recap, on 23 June, the grid experienced periods of low frequency which was below the safe operating limit for extended periods. NESO was forced to cut exports to recover it – initially by an Emergency Instruction on Britned which means the reduction  was mandatory, without the agreement of TenneT, and later Emergency Assistance from France, which is with agreement (although I suspect it might have been an “agree, or else” situation).

I wrote about this and submitted an FOI request for additional information. So far there has been no reply – the statutory response period expires on Friday. At the same time, Richard Tice of Reform wrote to NESO asking for information about events of 23 June, but has apparently received no response to date.

Within days, whistleblowers within the NESO control room approached Shadow Secretary of State for Energy Security and Net Zero, Claire Coutinho with complaints that the grid was insecure on 23 June and that NESO was hiding this fact. She raised this in Parliament on 7 July and again on 15 July with an Urgent Question (Coutinho’s comments to the House can be seen here). Coutinho asked the Information Commissioner to investigate allegations of a cover-up and that NESO engineers were instructed to work in “live” documents to avoid an FOI paper trail (draft documents are not disclosable under FOI rules). The ICO has declined to investigate on the basis that other investigations have been launched.

On 10 July Coutinho wrote to NESO following further whistleblower revelations. There has been extensive coverage in the media with control room engineers going directly to the press to share their concerns.

On 17 July the Times reported that an internal NESO report showed that five separate transmissions constraints were breached on 23 June, with the largest breach reaching 700 MW. The report said these breaches occurred with “no available pre or post-action mitigation options”. A second report seen by the Times, described as a “NESO Significant Event Report” written hours after the low frequency events on 23 June, states: “During the incident, system constraints were breached and system security was compromised.”

NESO confirmed the reports were genuine, but described them as preliminary documents produced quickly after the event that did not represent its final assessment. I find this hard to believe, but to a certain extent it’s irrelevant because what it implies is just as bad – if the immediate post event reports say the constraints were breached this means the control room in real time thought the constraints were breached and the grid was being operated in what engineers thought at the time was an insecure basis. It also would mean, if true, that the control room tools are completely inadequate.

The whistleblower also said:

“We had not 1 MW left to instruct, frequency response was depleted due to the prolonged unsafe low frequency and one fault on the transmission network or generation side would then cause a full blackout. It was unprecedented,”
– NESO control room engineer

Also on 17 July the Telegraph published covert recordings of NESO CEO Fintan Slye telling a staff meeting that the allegations were all false, and Director of Operations Craig Dyke expressing disappointment in the whistleblowers.

On 26 July the Times carried two stories. In the first it reported on a study by Cornwall Insight disclosed to it by a whistleblower, which revealed NESO “cannot accurately model the modern power system as the government pursues a drive towards renewable energy sources” and quoted the whistleblower saying NESO is “flying blind” in its ability to forecast supply and demand. According to Cornwall Insight, inaccurate forecasts create risks that NESO will be unable to keep the network stable to safely maintain security of supply.

In the same article, the Times reported the whistleblowers telling it that “the engineers have been raising these issues for two years” but did not feel heard.

“We don’t have an opinion on net zero, we just want the system to be safe, but the execs are too scared politically to say renewables are making the system unsafe. It will get worse week by week because we are connecting more things that we cannot model,”
– NESO control room engineers

Further details on the Cornwall report were covered by the Times here.

On 26 July the Mail on Sunday reported it had been contacted by a group of engineers which wrote a letter outlining concerns. The letter says

“We the engineers have asked Ofgem to investigate and ensure the system is safe for two years now. That is simply done by asking for proof that Neso can always work out how much energy is required. And they won’t do that and they won’t investigate. So we have told the world. June 23 was simply another day. We don’t have control of the system. We have tried our best. It’s now over to the public and the regulator. Please help,”
– NESO control room engineers

One NESO whistleblower told the Mail that a major blackout, is “an engineering certainty”. Worryingly they also claimed that NESO colleagues are now “re-running the models” to try to alter data and calculations to present a secure version of the grid on June 23.

NESO announced on 13 July that law firm Eversheds will investigate the allegations of inappropriate document handing and that the Corporate Affairs team inappropriately influenced control room decisions on 23 June. NESO has admitted in this post on X that Corporate Affairs has “input” into operational decisions which strikes me as deeply inappropriate.

On 17 July Ofgem announced if was essentially taking over this investigation, cutting NESO executives out of the regular updates, and instigating its own investigation into the security of supply concerns. Unfortunately, the Terms of Reference state that the initial fact finding will be carried out by NESO which will report to Ofgem on its compliance with its transmission licence over the latter part of June, and Ofgem will only investigate further if it thinks it’s necessary.

This strikes me as being completely inadequate given the allegations that NESO is being dishonest about the events of 23 June. Not only is a NESO-led investigation unlikely to report accurately IF the allegations of dishonesty are true, but it will be impossible for the public to have confidence in it.

So now Claire Coutinho has written to the new Secretary of State at DESNZ, Miatta Fahnbulleh, asking her to launch an independent inquiry, citing clear evidence that NESO has misled the public and potentially also ministers:

“Despite NESO’s repeated denials, they subsequently confirmed to The Times newspaper on 17th July that their initial assessment was indeed that constraint and reserve standards were breached, and that system security had been compromised. It is now certain that this breach was suspected and recorded within the organisation at the time. They have not provided any other subsequent assessment which contradicts this initial assessment.

When standards are breached, NESO are required to notify Ofgem and should notify the Department. I presume this did not happen.

After I had raised the allegations, the former Secretary of State and the Minister for Energy spoke to the Chief Executive of NESO. The Minister then told the House on 15th July that he had seen ‘a version of events’ and that “at no point did we come close to a breach” of reserve standards. Considering that NESO were aware that their initial assessment showed exactly this, either the Chief Executive misled the Minister, or the Minister misled the House. There will be a record of that call, so you will be able to check for yourself which it is.

There is more. On 13th July, the Chief Executive told an all-staff call with 500 participants that the allegations were ‘false.’ Senior management told staff that whistleblowers had ‘let them down.’ NESO then denied to The Telegraph that this had been said, only for a recording to emerge confirming that it had been.

…To summarise: NESO had internal documents which showed that staff believed there was a breach of security standards on 23rd June. Ofgem presumably was not made aware. Since then, NESO have misled the press, their own staff, and potentially Ministers,”
– Rt Hon Claire Coutinho MP, Shadow Secretary of State for Energy Security and Net Zero

All of the evidence now points towards the grid having indeed been insecure on 23 June, and that NESO executives have repeatedly made misleading claims to the contrary. However, rather than having to piece this together from disparate sources and anonymous whistleblower allegations, a properly independent investigation which allows control room engineers to speak freely to qualified (in engineering) investigators is necessary.

Is Ofgem now failing in its own statutory duties?

Ofgem does not have an express statutory duty to “maintain public confidence” in the energy system, but that doesn’t make public confidence irrelevant, nor does it allow the regulator to sit back and accept assurances from the organisations it’s supposed to oversee. Ofgem’s principal statutory objective under the Electricity Act 1989 is to protect the interests of existing and future consumers. Those interests expressly include security of electricity supplies.

In carrying out its functions, Ofgem must also act in the manner it considers best calculated to protect the public from dangers arising from the generation, transmission, distribution or supply of electricity. It must regulate transparently, accountably, proportionately and consistently, targeting action where it is needed.

Ofgem’s purpose is not just to process licence modifications, approve expenditure and receive compliance reports, it’s supposed to determine whether regulated firms are actually meeting their obligations, and to intervene when there’s credible evidence they aren’t.

Ofgem says it regulates energy markets by: issuing licences and setting licence conditions, providing guidance for energy companies, managing changes to industry codes, making sure that energy companies are following the rules, and taking action if not. In relation to security of supply, it says companies that own and operate gas and electricity networks must manage security of supply as part of their licence. They must also comply with relevant regulations and industry codes, including the Security and Quality of Supply Standard (“SQSS”).

Yet when serious concerns are raised about the operation of the electricity system, Ofgem’s approach seems to be to ask the regulated body whether everything is OK, accept the response and consider the matter to be closed. That’s not independent regulation, and it’s not how other bodies regulate their sectors.

Businesses (except the smallest ones) are not allowed to self-report on their financial health, they must be independently audited. Water companies may not self-report on tap water safety – it’s subject to independent testing. Pharmaceutical companies do not self-certify the safety of new medications, they must be reviewed and licenced by the Medicines and Healthcare products Regulatory Agency and approved for use in the NHS by the National Institute for Health and Care Excellence. Aircraft makers cannot asset their aeroplanes are safe, they are certified by the Civil Aviation Authority (or relevant overseas regulator such as the European Union Aviation Safety Agency or the US Federal Aviation Administration).

So why does Ofgem think it’s acceptable to allow NESO to self-certify?

If credible allegations are made that operational data are incomplete or misleading, that systems are being operated outside safe limits, that significant incidents are being downplayed, and/or that staff who raise concerns are being pursued rather than heard, Ofgem cannot discharge its responsibilities by simply asking the organisation concerned to respond.

The regulator must establish for itself what happened. In this case, that means obtaining the underlying operational records, system logs, control-room instructions, incident reports and internal communications, and interviewing control room engineers without management being present or knowing who is being interviewed, to protect whistleblowers and test whether the official account is consistent with raw data. This may necessitate the instruction of independent engineers with the appropriate operational expertise to conduct a review.

Public confidence will not be preserved by refusing to investigate uncomfortable claims. And suggestions that scrutiny itself may alarm the public hold no water. Confidence is earned through transparency and accountability, and where credible concerns arise, through thorough independent investigatation with the findings made public.

If the allegations are unfounded, an independent investigation will establish that and allow NESO to be cleared, while if they turn out to be true, the investigation will expose that and (hopefully) lead to improvements that will prevent a serious future failure.

There’s a tendency in the energy establishment to treat the physical operation of the grid as too technical for meaningful external scrutiny. Questions are answered with reference to procedures, modelling standards, governance structures and internal controls, and the absence of a blackout to date is taken as irrefutable evidence of grid security.

The Government’s own recent review of Ofgem concludes that “Ofgem’s current structure, tools and capabilities are no longer sufficient for a more complex and fast-changing energy system”, going on to say that it “needs clearer responsibilities, stronger and more agile enforcement, and enhanced organisational capability to anticipate risks and act decisively”. The review expressly argues for regulation that is more outcomes-based rather than focusing on procedure.

Permitting NESO to self-report on energy security, particularly when it’s accused of hiding and manipulating data, is unlikely to deliver the outcomes expected either by Parliament or the public. In no other sector where public safety is at risk does the regulator take such a laissez-faire approach. Ofgem is not simply an economic regulator, it has a duty to act in the best interests of consumers having regard to security of supply.

Allowing consumers to be exposed to the risk of blackouts or critical equipment failures is not consistent with those duties. If the alleged constraint breaches involved transmission assets being operated beyond safe thermal or other operational limits, that would raise an obvious public-safety concern.

Given both the seriousness of the allegations and the evidence now in the public domain, Ofgem is putting itself at risk of breaching its own statutory duties if it continues to rely on NESO’s assurances rather than independently establishing the facts.

I encourage it to think again, and now, finally institute a properly independent investigation into the events of late June. Public confidence, and safety, depend on it.