UK energy regulator Ofgem has announced Drax Power Ltd’s decision to appoint Forvis Mazars to conduct an independent external audit of its annual profiling data and associated reporting. It follows an announcement on 2 September that the UK’s Financial Conduct Authority has started an investigation into the company covering the period January 2022 to March 2024 ‘relating to certain historical statements regarding Drax’s biomass sourcing and the compliance of Drax’s 2021, 2022 and 2023 Annual Reports with the Listing Rules and Disclosure Guidance and Transparency Rules’.
The audit of Drax’s reporting will cover the compliance period 1 April 2023 to 31 March 2024 (referred to as CP22). This is a non-financial audit, focusing on operational and compliance data and relates to 98% of Drax’s international supply chain and their legal obligations to the Renewables Obligation (RO) scheme. It is said to be the largest audit of its kind.
The auditor has been appointed by Drax following an ‘open and transparent process’, wherein Ofgem was an active observer throughout. The independent audit will be completed to the internationally recognised standard, ISAE3000, and completed to a ‘reasonable’ level of assurance.
Drax committed to the audit following Ofgem’s enforcement investigation into the company which concluded in August 2024. The timeframe for commissioning the audit was extended to ensure Ofgem was satisfied with the rigour of the tendering process. Given the complexity of the required audit, both Ofgem and Drax engaged closely with a range of prospective auditors to refine the scope to best ensure the outputs would meet Ofgem’s needs. Ofgem is satisfied that the subsequent tender process and the appointment of Forvis Mazars was competitive and appropriate.
Assuring independence
Whilst this independent audit is being led, tendered, commissioned and paid for by Drax, Ofgem will remain engaged throughout, to ensure confidence in the output of the commissioned audit. This will be achieved by the appointment forming a tripartite agreement of Ofgem, Drax and Forvis Mazars, with the audit commencing during this month and conducted in line with the agreed terms of reference.
Drax has agreed in full to the audit, its terms of reference, and to the consequences should any potential regulatory breaches be identified. Ofgem will receive the full audit report and will publish a summary of the findings upon completion.
Neil Lawrence, Ofgem’s director of Delivery & Schemes, commented: “Ofgem takes accurate reporting extremely seriously. The onus is on generators to meet their obligations in full, including how they report their data. We are clear that consumers deserve transparency, which is why we have committed to publishing the findings of this comprehensive, international audit on completion. Ofgem will not hesitate to take appropriate action if it reveals any compliance issues.”
