Energy producer SSE has been hit by a nearly £10m fine for charging the national grid – and bill payers as a result – too much money to power down during times when electricity infrastructure can’t take all the traffic on the system.
Energy regulator Ofgem levied the £9.8m fine against SSE for breaching its generation licence by securing “excessive” payments from the national grid electricity system operator.
SSE avoided a steeper £11.58m fine by settling the investigation early.
Payments are made by the grid operator to electricity producers to stop them generating when the grid cannot deal with all the electricity it’s moving.
SSE made the amount it charged to reduce output “significantly more expensive” at the hydropower station in Foyers, Scotland, Ofgem said.
The decision was to increase profit and bring prices in line with what SSE thought other pumped storage operators were charging, the regulator said.
The fine is only a fraction of company profits. Latest full year results at SSE show it recorded a pre-tax profit of £2.18bn in the year up to March.
Those hiked prices – increased in May 2020 – were “expensive relative to several relevant comparators”, and were not compliant with Ofgem’s licence condition guidance, Ofgem added.
A generation licence is needed to supply electricity to the market.
All electricity customers, who use power from the national grid, ultimately paid the price for the increase, it said.
SSE plc doesn’t have any household energy customers in the UK after selling its domestic energy arm to Ovo in 2019.
The company, which is listed on the London Stock Exchange, produces power via windfarms and hydropower.
Ofgem said there’s no evidence the breach was deliberate but said “it should have been clear” to SSE and its senior management that the carried a significant risk of breaching the licence guidance.
SSE “engaged constructively” during Ofgem’s investigation and “expressed a willingness to settle”, Ofgem said.
An SSE spokesperson said: “We aim to comply with regulations at all times and believed we were doing so in this case.
“We co-operated fully with the investigation. Following the investigation, we are updating our relevant procedures accordingly.”