Energy giant SSE to pay £9.8m penalty for pricing breach

Energy giant SSE is to pay £9.8m for breaching its generation licence, the industry regulator has announced.

Ofgem said the Perth-based company overcharged the National Grid Electricity System Operator during a time of "transmission constraint".

This is when operators are paid to drop output if there is not enough network capacity to take power out of an area where generation outstrips demand.

Ofgem said there was no evidence that SSE's actions were deliberate.

During transmission constraints, the electricity system operator takes action to manage flows across the network to increase and decrease the amount of electricity produced by different generators.

But there are risks that generators can exploit their position by increasing prices to reduce output and Ofgem puts rules in place to prevent this.

Ofgem launched a probe into SSE's actions at the Foyers pumped storage power station in North Ayrshire in October 2021.

It found that SSE made the bid prices it charged the electricity system operator to lower output "significantly more expensive", including in periods of transmission constraint.

Ofgem said that, while there was no evidence to suggest the move was deliberate, it found that SSE breached the rules that were in place.

It warned that the pricing actions would ultimately increase costs for consumers.

Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: "Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users.

"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.

"If they fail to do so, they will face significant consequences."

SSE has since pledged to put in place a new pricing system designed to properly reflect the costs and benefits of reducing its generation at Foyers.

Ofgem added that SSE's fine was reduced from £11.58m as the company settled the investigation early.