Ofgem has fined SSE £2.06 million for failing to publish, in a timely manner, information about the availability of its generation capacity.
This follows an investigation into the utility publishing inside information, breaching Regulation on Wholesale Energy Market Integrity and Transparency (REMIT). This is classed as anything that would significantly affect the price of wholesale energy, with participants expected to publish such information in an ‘effective and timely’ manner.
However, on 22 March 2016 SSE signed a non-binding agreement with National Grid to provide ‘Black Start’ capability from 1 April 2016 using any of the three generating units at its coal fired Fiddlers Ferry power station, which has since been decommissioned.
At the time, these units had a combined capacity equivalent to 3% of Britain’s peak electricity demand, and as such had a significant impact on demand and supply, affecting wholesale prices. The agreement with National Grid reversed the likelihood that the three units would close at the time, and is classified by Ofgem as inside information.
SSE waited until 20 March 2016 to make an announcement once it had finalised the contract with National Grid, and as such did not publish the information in a timely manner.
Jonathan Brearley, chief executive at Ofgem, said the company’s failure to publish the information in “a timely and effective manner” led to market participants trading for four days under a false impression of the supply availability.
“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.”
The regulator’s investigation found that SSE did consider whether it was in possession of inside information, but failed to reach the correct conclusion and publish this on 22 March. However, it did not find that SSE acted in bad faith.
As such, when imposing the multi million pound fine on the utility – the first issued for a REMIT breach – Ofgem has taken into account the newness of the obligation at the time of the breach, and as such guidance on publication of information was limited. Future failures to publish inside information will lead to higher penalties therefore.
Brearley continued: “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 was fully co-operative with Ofgem’s investigation, and by settling the investigation early qualified for a 30% discount. The initial proposed settlement was a penalty of approximately £2.6 million.
Martin Pibworth, SSE’s energy director, said the company took market disclosures “extremely seriously” and had published the ‘Black Start’ contract once signed, in line with its interpretation of the regulations at the time.
“We subsequently understood that Ofgem’s interpretation required disclosure to the market at an earlier stage. We admit that our approach was not in line with this requirement.
“SSE did not benefit from disclosing only once the contract was signed and remains committed to clear and transparent rules for all market participants. We will be pressing regulatory authorities for additional guidance for market participants going forward.”
The penalty follows Ofgem fining InterGen £37 million for sending National Grid deliberately misleading signals in April, as part of an investigation that also found weaknesses in the company’s procedures, management systems and internal controls with respect to REMIT compliance. Again, the regulator stated the fine was designed to send a strong signal to the market that Ofgem will not tolerate any form of market abuse.