Energy giant 'SSE' to pay £9.8M for pricing breach

By Jamie

Energy giant SSE (formerly known as Scottish and Southern Energy) has been hit with a record-breaking fine due to serious regulatory violations. The company, one of the United Kingdom’s largest energy suppliers, has faced intense scrutiny in recent years over its practices and adherence to industry regulations. SSE has long been a prominent player in the UK’s energy market, providing electricity and gas to millions of customers across the country. However, concerns have been raised regarding the company’s conduct and compliance with regulatory standards. As of the 6th of June, SSE has settled at a £9.8 million (reduced from £11.58 million as the company settled the investigation early) penalty after breaching its generation licence, the industry regulator (Ofgem) has announced.

So, what regulatory standards were broken? To answer this firstly we need to understand SSE’s business. SSE provide electricity to homes mainly in Scotland and in some areas Transmission constraints can occur in situations such as when there is not enough electricity network capacity to transport power out of an area in which local generation outstrips demand. 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, given that it only has limited alternatives available to it in these situations, 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’s probe, which was launched in October 2021, found that SSE made the bid prices it charged the electricity system operator to lower output from the Foyers pumped storage power station at Loch Ness “significantly more expensive”, including in periods of transmission constraint.

Following an extensive investigation by the Ofgem, SSE has been fined a staggering amount for its transgressions. The fine, set at an unprecedented level, reflects the severity of the violations and serves as a strong message to other industry participants to not exploit abuse their power in the energy sector and exploit its consumers. The repercussions of SSE’s fine extend beyond the company itself. The energy sector as a whole will undoubtedly be affected, as the case sets a precedent for stricter enforcement of regulatory standards. Other energy providers will be under increased pressure to ensure compliance with regulations, avoiding similar penalties and maintaining the integrity of the industry. This landmark case may usher in a new era of heightened scrutiny and accountability for energy companies across the United Kingdom.