Ofgem weighing up National Grid's cost recovery plea

(Reuters) - Britain's energy market regulator Ofgem said that it was consulting on National Grid Plc's (NG.L) request to recover the rising costs of two contracts for grid services that it agreed with SSE Plc (SSE.L) and Drax Group Plc (DRX.L).

The contracts are worth 113 million pounds ($164.4 million) and included services such as black start, the regulator said on Wednesday.

Black start is a procedure whereby certain generators start up and provide electricity to the transmission system without an external power supply.

Ofgem said that it had set a cost target for National Grid for these services and that National Grid has spent significantly more money than the agreed target.

The cost of black start services, traditionally the preserve of Britain's coal-fired generators, has grown as coal plants have closed and operating costs risen.

Ofgem must decide whether to grant National Grid's request in part or in full.

National Grid agreed a grid services deal with SSE for its Fiddler's Ferry power station and Drax through a tender process, Ofgem said.

SSE extended the lifespan of its Fiddler's Ferry coal-fired power station near Manchester until at least March 31, 2017 after securing a contract with National Grid to provide backup power for winter 2016/17.

It previously said the plant would likely close this year.

(This story corrects year reference in paragraph 8 to 2016/17, not 2017/17)

(Reporting by Rahul B in Bengaluru and Oleg Vukmanovic in Milan; Editing by Gopakumar Warrier and Louise Heavens)