Market News

Ofgem Audits – What You Need to Know

25th May 2019

PV plants are now more likely than ever before to be the subject of an Ofgem audit, so what should PV plant owners and asset managers expect from these audits, and what can be done to prepare for them? These are some of the questions prepared by the Solar Trade Association and QE, and put to Ofgem in a recent STA driven initiative. We have reviewed Ofgem’s responses carefully at QE, and have considered what they might mean for our clients.

With the closure of the ROC and FIT schemes, Ofgem now have more resources to dedicate to carrying out audits, and there is more at stake with subsidies having been completely withdrawn. Ofgem estimate that the RO scheme is worth £4.5bn and that the FIT scheme is worth £1.28bn, all of which is ultimately funded by electricity consumers and part of Ofgem’s role is to ensure that these public funds are properly allocated. Given this context, it should come as no surprise that Ofgem have said that they plan to carry out 90 solar plant audits this year – three times as many as in previous years.

Ofgem have said that they plan to carry out 90 solar plant audits this year – three times as many as in previous years.

In undertaking these post-accreditation audits, QE understand that Ofgem will initially authorise an auditor who will directly contact the superuser of the generating station. The auditor’s purpose will be to verify the accuracy of the information provided in the original accreditation application submitted by the generator.

Upon request, this auditor must be granted access to the generating station and will be permitted to inspect or test anything at the site which is connected to the generation of electricity. The auditor may also request any records relating to the generation process and any relevant electricity meter readings. A date for a site visit will be agreed and the auditor will most likely ask for certain documentation to be provided ahead of this date. Ideally the auditor should be chaperoned around the site by someone who is familiar with the Ofgem application and who would be able to answer technical questions relating to it.

Documentation that the auditor can request can include anything from As Built Drawings and Commissioning documentation to PPAs and Connection Agreements. Throughout the audit process, the auditor may ask follow up questions and request further information and documentation.

As there is technically no limit on how far back Ofgem requests for data can go, it would be prudent for PV plant owners to ensure that the documentation that they possess is complete. It is important to note that the auditor may require evidence of compliance with grace period conditions, where these had been applied for, which will date all the way back to a generating station’s development phase. This means that PV plant owners should be comfortable that this documentation was provided at the time that the asset was purchased. Whilst legal due diligence undertaken at the time of purchase would have been primarily focused on the presence of an accreditation letter, there may not have been sufficient focus on ensuring this sort of evidence was provided by developers.

Ofgem have made it clear that they expect generating stations’ superusers to have access to all documentation previously submitted with accreditation applications. Furthermore, they have stressed that they would expect any new operator of a generating station to have had full sight of eligibility information during any due diligence process in buying the asset.

If an audit reveals uncertainty around a connection date, Ofgem would have the ability to downgrade the generating station to a lower ROC banding that corresponds to what they deem to be the actual connection date. Where PV plant owners are aware of any periods of zero generation immediately following proposed commissioning dates, they should be prepared to provide adequate explanations for these.

Ofgem’s ultimate sanction in case of an unsatisfactory audit would be to take away a generating station’s accreditation altogether. If accreditation is withdrawn, the generating station will no longer be eligible for ROCs, and would not be able to reapply to either the RO or FIT schemes. Ofgem would undertake a separate assessment with regard to revoking any ROCs that have already been issued.

Ofgem’s ultimate sanction in case of an unsatisfactory audit would be to take away a generating station’s accreditation.

Following an audit, Ofgem have confirmed that they would send the audit report to the superuser of the generating station and this would set out what is required in order to close out the audit findings. Whilst Ofgem do not intend to audit every PV plant, they have stated that they would not hesitate to audit the same site multiple times if they believe there is good reason to do so.

Whilst at QE we have assisted our clients navigate their way through Ofgem audits in the past, we expect the frequency of these audits to increase and as such we are prepared for these. In particular, we have started compiling lists of all documentation that might be required to pass an audit and looking into where there are potential gaps in this information. We would be more than happy to discuss further services that we can offer PV plant owners who would like to ensure they are as prepared as they can be for an audit.

If you would like to speak to us about this, or any related matter, please contact QE’s Head of Legal, Julia Obermöller, via the enquiries section of our website.

 


This article is written and edited by Shirine Azzi. She can be contacted at: shirine.azzi@quintasenergy.com

 

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