Proactive Investors - Drax Group (LON:DRX) will pay a penalty of £25 million to the energy watchdog's redress fund after an investigation found it provided inaccurate data on the types of wood it uses in its biomass burners as part of the UK renewable energy regime.
Regulator Ofgem carried out a probe into the company after it was accused of burning wood from some of the world’s most precious forests, with a report finding that timber was taken from rare forests in Canada despite them being designated as 'no go areas'.
The investigation looked into whether Drax had breached annual reporting requirements relating to the UK Renewables Obligations Certificate scheme, as well as other related matters.
After concluding the probe, Ofgem today said it found "an absence of adequate data governance and controls in place" at Drax, leading to the company misreporting data in its annual submission for 2021-2022.
Drax was also unable to provide the regulator with sufficient evidence demonstrating how it had arrived at the figures in its submission, and was unable to support the reliability of its profiling data reporting of forestry type and sawlogs for Canadian wood deliveries.
But Ofgem said it found no evidence suggesting that Drax was issued with ROCs incorrectly or that the company failed to meet the government's sustainability threshold for biomass, which require a minimum of 70% of biomass to come from sustainable sources to receive funding from the ROC scheme.
Drax accepted the findings of the investigation, Ofgem said, and as well as the payment to the Energy Industry Voluntary Redress Fund will re-submit a new annual profiling submission in respect of forestry type and saw log proportions.
It will also commission an independent external audit of the international supply chain for the period from April 2023 to March 2024, covering 98% of its supply chain, which will be published.
Ofgem chief Jonathan Brearley said: "This has been a complex and detailed investigation. Energy consumers expect all companies, particularly those receiving millions of pounds annually in public subsidies to comply with all their statutory requirements.
"There are no excuses for Drax's admission that it did not comply with its mandatory requirement to give Ofgem accurate and robust data on the exact types of Canadian wood it utilises. The legislation is clear about Drax's obligations - that's why we took tough action."
He said Drax accepted that it had "weak procedures, controls and governance which resulted in inaccurate reporting of data" and while the regulator currently has no reason to believe there have been further instances of non-compliance it "won't hesitate to act if required".