Drax and InterGen fined £39m

<p>Ofgem has fined Drax and InterGem £39 million for failing to meet energy saving targets.</p>

Energy firms Drax and InterGem have been hit with a combined fine of £39 million by Ofgem.

The regulating body has issued penalties to the two companies for failing to meet energy saving targets for low-income homes. North Yorkshire-based Drax has been handed a £28 million fine, the largest ever issued by Ofgem, while InterGem faces an £11 million bill. The decision follows similar fines given to British Gas, SSE, Scottish Power and GDF/Suez.

Ofgem has taken action against Drax and InterGem after the two were unable to meet standards laid out in the Community Energy Saving Programme (CESP), part of the government's Home Energy Saving Programme. The fine levied against Drax dwarfed the previous high of £15 million which was issued by Ofgem to the National Grid in 2010 for a different issue.

Dorothy Thompson, chief executive of Drax, 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."

The company has now vowed it will be working alongside National Energy Action to create a range of measures designed to provide support for vulnerable energy consumers. Ofgem also noted that InterGem had missed its target by a considerable margin putting a burden on low-income households.

Sarah Harrison, senior partner in charge of enforcement at Ofgem, explained that the fine reflected the "seriousness of these failings" and also means the company has not gained through its non-compliance.

Drax and InterGem's fines come after Scottish Power was given a three-month deadline earlier in November to improve its customer service. Ofgem warned the company that it will be banned from sales to new customers should it fail to meet the new standards laid out by the regulator.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.