I think it's using the power just to charge the battery, but (I'm going to go out on a limb here because I know nothing) in any case I gather it's the controller and/or motor which determine the power draw on a generator, rather than the generator actually pushing the electricity at the motor if that makes sense. One thing I've learnt from reading this site is that the wattage limit, interestingly, just refers to a figure printed on the motor which actually represents the *minimum* continuous wattage it will put out. The real max wattage running through a motor, is apparently the controller amps x the battery voltage, so a "max 250w" motor could it seems do 1000w and still be legal. I think.
How that works I don't know and I'd be happy if anyone were to clarify or correct this - because (to go off topic, apologies) if it's true it's not clear to me why a 350w or 500w motor with 250w printed on it isn't legal provided the bike has the speed restricted to 15.5 mph (given the wattage issue seems so meaningless).