North Yorkshire-based Drax, which meets eight per cent of the UK’s electricity demand, was one of two companies punished by Ofgem for not doing enough under the Government’s Community Energy Saving Programme (CESP).
The regulator said the actions of Drax and InterGen meant several thousand households in some of the most deprived areas of Britain missed out on energy-saving measures that would have helped lower bills.
Investigations are continuing into four other energy companies that failed to deliver their obligations under the CESP scheme.
Drax criticised the size of the penalty and said it was wrong to include independent generators in CESP as they have no direct relationship with customers or any experience in delivering energy schemes.
About £20m of the penalty will be used to benefit vulnerable energy consumers through the charity National Energy Action, with the remaining £8m to be paid as a fine or as further consumer redress.
InterGen, which has 11 power plants worldwide including at Coryton in Essex, Spalding in Lincolnshire and Rocksavage in Cheshire, will pay £11m.
Under CESP, generators as well as energy suppliers had to deliver energy-saving measures to households in low-income areas by December 2012.
Drax Power delivered 37.1 per cent of its carbon emissions reduction target, having outsourced its CESP obligation to a third-party provider at a cost of £17m. It said it has since settled an action against the firm for breach of contract.
Drax, a coal-fired power station that was built in two stages in the 1970s and 1980s, is in the process of converting three of its six generating units to burn biomass.
Chief executive Dorothy Thompson 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.
“Our core competence is in electricity generation and that is the best way for us to serve the needs of the UK in terms of carbon savings.
“Through undertaking the largest decarbonisation project in Europe, Drax will deliver carbon savings of around 12 million tonnes a year through burning sustainable biomass in place of coal.
“Our target under the CESP was to deliver carbon savings of less than one million tonnes over the lifetime of the energy efficiency measures.
“By comparison, our biomass conversion will deliver hundreds of millions of tonnes of carbon savings over the same timeframe.”