Energy group fined £2m over failure that could have affected market prices
Energy watchdog Ofgem has fined SSE £2.06m for failing to adhere to industry regulations regarding its Fiddler’s Ferry power station, near Warrington.
The fine is the first relating to the publication of inside information in energy markets in Great Britain and the EU and, Ofgem said, sends a strong message to SSE, and other wholesale energy market participants, about the importance of fully complying with REMIT rules.
Under the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), inside information is information which is likely to significantly affect the price of wholesale energy.
Participants must publish inside information in an ‘effective and timely’ manner.
On March 22, 2016, SSE signed a non-binding agreement with National Grid (NGET) to provide ‘Black Start’ capability at any one of three generating units at its Fiddler’s Ferry power station from April 1, that year.
Black Start is the procedure to recover from a total, or partial, shutdown of the transmission system which has caused an extensive loss of supplies. This involves isolated power stations being started individually and gradually being reconnected to each other to form an interconnected system again.
Previously, SSE had announced that the units were likely to close from that date, April 1.
With a combined generating capacity equivalent to three per cent of GB peak electricity demand, these units had a significant impact on GB demand and supply, affecting wholesale prices.
Ofgem’s investigation found that SSE’s non-binding agreement with NGET on March 22, and its decision to retain transmission entry capacity – the commercial right to export power on to the National Grid – for the three units on that date, reversed the likelihood that the units would close.
Consequently, the agreement was likely to have a significant effect on wholesale prices, and was, therefore, inside information.
Ofgem said SSE did not publish this information in a timely manner. Instead it waited until March 30, 2016, to make an announcement once it had finalised the contract.
SSE’s delay in making a public announcement resulted in four days trading, affected by how Easter fell that year, without the market knowing that more generation was likely to be available than previously thought.
It is likely this led to some market participants paying more for wholesale electricity than they should have.
The investigation found that, while the company did consider whether it was in possession of inside information on March 22, it failed to reach the correct conclusion and publish on that date.
However, in the course of its investigation Ofgem did not find evidence that SSE acted in bad faith.
Ofgem has imposed a £2.06m fine on SSE for the breach.
In reaching this decision, Ofgem said it has taken into account that REMIT was a relatively new obligation at the time of the breach, that guidance on the publication of inside information of this type was limited, and that the finding was the first of its kind under REMIT.
Future failures to publish inside information in an effective and timely manner are likely to result in higher penalties.
SSE fully co-operated with Ofgem’s investigation. By settling this investigation early, the company has qualified for a 30% discount for early settlement from the proposed approximate £2.6m penalty.
Ofgem chief executive, Jonathan Brearley, said: “SSE’s failure to publish inside information in a timely and effective manner resulted in market participants trading for four working days under a false impression of supply availability in GB’s electricity market.
“This meant that market participants were likely to have paid higher prices than they needed to, and risked undermining confidence in the wholesale electricity market.
“This fine sends a strong message to market participants that they must be familiar with, and keep to, their obligations under REMIT rules or face enforcement action by Ofgem.”
SSE announced in June, 2019, that it was closing Fiddler’s Ferry, where 160 staff worked, due to “unsustainable” losses.
The site was shut on March 31, this year.