Investigation into SSE Generation Limited’s compliance with the TCLC
Investigation
- Open
- Decision proposed
- Closed
Publication date
Closing date
Company
Industry sector
Generation and Wholesale Market
Licence type
Electricity Generation Licence
Decision
On 4 October 2021, Ofgem opened an investigation into whether SSE Generation Limited (“SSE”), the owner and operator of Foyers pumped storage power station, failed to comply with the requirements of condition 20A of the Electricity Generation Standard Licence Conditions (referred to as the Transmission Constraint Licence Condition, or “TCLC ”).
In order to meet our electricity needs, power must get from where it is produced to where it is consumed. Where constraints on the transmission system exist, then the electricity system operator (“ESO”) will take action to manage flows across the network, including using the balancing market to increase and decrease the amount of electricity produced by different generators. Situations which could cause transmission constraints might, for example, include where there is insufficient network capacity to transport power out of a particular area in which local generation exceeds demand.
Typically, when managing a transmission constraint, ESO will only have a limited number of alternatives available to it. This creates a risk that generators could exploit their position by charging the ESO excessive prices to reduce their output. The TCLC prohibits them from doing so.
On 6 June 2023, Ofgem published its finding that SSE had breached the TCLC by securing excessive payments from the ESO in exchange for reducing output at Foyers, and gave notice that it proposed to require the company to pay £9.78 million into the Energy Redress Fund as a consequence.
On 25 July 2023, having considered representations received in response to that notice, Ofgem confirmed its decision, closing the investigation. SSE is required to make the payment into the consumer redress fund no later than 5 September 2023.
SSE co-operated and engaged constructively during the investigation and expressed a willingness to settle the case. By settling this investigation early, the company qualified for a discount compared to the £11.58m it would otherwise have been required to pay. As part of the resolution of the investigation, SSE also committed to put in place a new pricing methodology designed to properly reflect the costs and benefits to SSE of reducing its generation at Foyers.