Ofgem has today formally announced its decision to impose a penalty of £9.78 million on SSE Generation Limited (SSE) for a breach of its Generation Licence.
The penalty is linked to SSE receiving excessive payments from the Electricity System Operator (ESO) during ‘transmission constraint’ periods.
These constraints arise when the transmission system lacks sufficient capacity to transport power out of specific areas with a surplus of local generation.
In October 2021, Ofgem initiated an investigation into SSE’s adherence to the Transmission Constraint Licence Condition (TCLC) concerning the Foyers pumped storage power station in Northern Scotland.
The station frequently operates during transmission constraint periods.
During the investigation, Ofgem found that in May 2020, SSE decided to increase the bid prices charged to the ESO to reduce Foyers’ output significantly, even during transmission constraint periods.
This change was made to align with the market practices of other pumped storage operators and to boost profits.
Ofgem stated that there is no evidence to suggest that the breach was deliberate, meaning SSE did not intentionally change its pricing strategy for Foyers with the knowledge that it would violate the TCLC.
However, Ofgem believes that SSE, including its senior management, should have been aware that the revised approach posed a substantial risk of breaching the TCLC.
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem, said: “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.”
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