Ofgem launches Drax probe, shares slide

(Sharecast News) - The UK energy regulator has launched an investigation into Drax Group's annual biomass profiling. In a brief statement, Ofgem said on Wednesday that it was investigating whether Drax Power was in breach of annual profiling reporting requirements relating to the Renewables Obligations scheme and other related matters.

It noted that it had not made any findings about possible non-compliance.

However, the announcement still weighed on Drax's shares, and by 0845 BST the stock was off 5% at 561p.

Drax said: "Like all energy generators, Drax receives regular requests from Ofgem and continues to cooperate fully throughout this process.

"Last year, Drax appointed a third party to independently verify the accuracy of its biomass sustainability and profiling data as part of an ongoing process.

"Drax is confident in the compliance of its biomass with the renewables obligation criteria."

The Renewables Obligation scheme, which is administrated by Ofgem, was introduced in 2002 to encourage generation of electricity from eligible renewable sources in the UK. Electricity suppliers have an annual obligation to present to Ofgem with a specified number of Renewable Obligation Certificates per megawatt hour of electricity supplied to customers during each obligation period.

Drax produces electricity at its biomass-fuelled power station near Selby in North Yorkshire. The power station uses compressed wood pellets.