Ofgem stated that the Perth-based company overcharged the National Grid Electricity System Operator during “transmission constraint”
This is when operators are compensated to reduce output if there is insufficient network capacity to transport excess electricity out of a location where generation exceeds demand.
Ofgem stated that there was no evidence SSE’s actions were intentional.
During transmission constraints, the electricity system operator manages network flows to increase and decrease the quantity of electricity generated by various generators.
Ofgem has provisions in place to prevent generators from abusing their position by increasing prices to reduce output.
In October 2021, Ofgem initiated an investigation into SSE’s actions at the Foyers pumped storage power station near Loch Ness.
It was determined that SSE made the bid prices it charged the electricity system operator to reduce output “significantly more expensive”, including during transmission constraint periods.
Expenses for customers
Even though there was no evidence to suggest the move was intentional, Ofgem determined that SSE violated the rules in force.
It warned that the pricing actions would ultimately lead to an increase in consumer costs.
Since then, SSE has promised to adopt a new pricing system that better represents Foyers generation reduction costs and advantages.
Ofgem stated that SSE’s sanction had been reduced from £11.58 million due to an early settlement of the investigation.
SSE will be responsible for contributing any penalties to the Energy Redress Fund.
The regulator said it will consider written representations or objections before deciding whether to penalise SSE.
What is the Energy Restitution Account?
Ofgem established the fund to distribute payments from rule-breaking energy companies to charitable organizations. It is administered by Energy Saving Trust.
Beneficiaries are expected to implement energy-related initiatives that assist energy consumers in vulnerable circumstances.
The cash can be utilised for everything from energy-efficient home improvements to consumer counselling.
SSE’s spokesman stated, “We strive to comply with regulations at all times and believed we were in this instance.”
We participated in every aspect of the investigation.
“As a result of the investigation, we are revising our relevant procedures.”
Director of enforcement at Ofgem, Cathryn Scott, stated that consumer protection was the agency’s top priority.
She added, “This enforcement action conveys a strong message to all generators that they must implement controls to ensure that their bid prices are set so that they do not receive excessive benefits during transmission constraint periods.
If they do not comply, they will face severe consequences.
