18th Mar 2015 11:23
LONDON (Alliance News) - UK electricity and gas regulator Ofgem Wednesday said it has penalised SSE PLC GBP100,000 after the energy company admitted to receiving excessive constraint payments.
Constraint payments are a tool used by the National Grid to balance demand and supply on the energy network in the UK. At times of high or low demand, the National Grid asks generators to to either reduce or increase their supply, offering constraint payments to the company in exchange.
In 2012, new rules were introduced that prevents electricity generators from "exploiting market conditions and charging excessive prices," said Ofgem.
In January 2014, SSE submitted offers to the National Grid to reduce the amount of electricity it generated at six of its Scottish hydro-electric power stations due to a flood risk at the dams, but Ofgem said the company reduced production for longer than was necessary, which led to National Grid paying more than it should to reduce generation from the power stations to help balance the country's electricity supply.
"Given SSE?s admission to its failure, its action to make amends and the small scale of the breach, Ofgem believes the GBP100,000 payment is the right level of penalty and will not take further action in this case," said Rachel Fletcher, a senior partner for markets at Ofgem.
Ofgem said the payment received from SSE is the first under the regulator's transmission constraint rules, and said the GBP100,000 payment "ensures SSE didn't gain financially". The funds will go to Energy Action Scotland, an organisation that campaigns for an end to fuel poverty in Scotland.
"Ofgem?s rules to stop generators from overcharging ensure that consumers pay no more than they need to for a reliable energy supply. We?ve had concerns about practices in this area and we are actively monitoring generators to ensure they are playing by the rules," she added.
Still, SSE shares were up 1.3% on Wednesday morning to 1,520.12 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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