SSE Fined £9.8 Million for Overcharging to Reduce Power Output

William Mathis, Bloomberg News

(Bloomberg) -- SSE Plc was fined about £9.8 million ($12.2 million) after the UK’s energy regulator found it received “excessive payments” to lower generation at a Scottish hydropower plant.

During a “transmission constraint,” when there’s surplus power produced in one area but not enough capacity to transport it elsewhere, National Grid ESO will pay generators to shut off as it balances supply and demand. That means there’s a risk generators can “exploit their position” to charge excessive prices to reduce output, Ofgem said in a statement.

While SSE didn’t deliberately break the rules, it should have been clear to managers that their actions weren’t allowed, the regulator said. Such constraints may become more frequent during the transition from large fossil fuel plants to smaller renewable units, with consumers ultimately bearing the cost of any out-sized payments to generators.

“This enforcement action sends another strong signal to all generators that they must put in place controls to ensure that their bid prices are set in a way that ensures that they do not obtain excessive benefits during transmission constraint periods,” said Cathryn Scott, director of enforcement and emerging issues at Ofgem.

Such constraints often happen in Scotland, where there is an abundance of wind and turbines to generate electricity, but few people to use the energy locally. The investigation into SSE related to its Foyers pumped storage power station in Scotland.

In May 2020, SSE raised prices for the bids it made to National Grid to turn down generation, including during transmission constraint periods. The company did this to increase profits and because it believed other similar power stations were doing the same thing, Ofgem said. The higher prices violated the rules for conduct during transmission constraints.

SSE committed to change its pricing methodology at the Foyers plant.

“We aim to comply with regulations at all times and believed we were doing so in this case,” a spokesperson for SSE said in an emailed statement. “Following the investigation, we are updating our relevant procedures accordingly.”

SSE cooperated during the investigation and settled the case early, which reduced the amount it had to pay by 16%. The £9.78 million payment will go to the Energy Redress Fund, which supports people most at risk from high energy bills.