UK regulator hits SSE with fine over REMIT generation capacity breach

London — UK energy regulator Ofgem said Sept. 3 it had fined utility SSE GBP2.06 million ($2.74 million) for failing to publish information about the future availability of generation capacity under the REMIT disclosure regime.

Ofgem said the failure by SSE to publish information about the availability of its Fiddler's Ferry coal-fired power station in 2016 likely had a "significant effect" on forward wholesale electricity prices.

"The fine, the first relating to the publication of inside information in energy markets in Great Britain and the EU, sends a strong message to SSE, and other wholesale energy market participants, about the importance of fully complying with REMIT rules," Ofgem said.

Under REMIT, the definition of "inside information" is information which is likely to significantly affect the price of wholesale energy. "Market participants must publish inside information in an effective and timely manner," Ofgem said.

SSE fully co-operated with Ofgem's investigation, the regulator said, and by settling the investigation early, the company qualified for a 30% discount for early settlement from the proposed around GBP2.6-million penalty.

Fiddler's Ferry contract

The investigation centered on a non-binding heads of terms agreement SSE signed with grid operator National Grid on Mar. 22, 2016, about the retention of transmission entry capacity for three units at the site.

This, Ofgem said, reversed the likelihood that the three units would close.

"Consequently, the agreement was likely to have a significant effect on wholesale prices, and was therefore inside information," Ofgem said.

It said that with a combined generating capacity equivalent to 3% of British peak electricity demand, these units had "a significant impact" on demand and supply, affecting wholesale prices.

Ofgem's investigation found that SSE did not publish information on the non-binding agreement with National Grid "in a timely manner."

"Instead it waited until Mar. 30, 2016 to make an announcement once it had finalized the contract," Ofgem said.

"SSE's delay in making a public announcement resulted in four days trading without the market knowing that more generation was likely to be available than previously thought," it said.

"It is likely this led to some market participants paying more for wholesale electricity than they should have."

SSE's energy director Martin Pibworth said Sept. 3 that the company took its market disclosures "extremely seriously."

Pibworth said SSE acted in good faith, publishing details of the contract for Fiddler's Ferry power station once signed, in line with its interpretation of the REMIT 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," he said.

"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."

Future fines

Ofgem said that in the course of its investigation, it did not find evidence that SSE acted in bad faith.

It added that it took into account the fact 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," it said.

"The finding highlights the importance for companies of recognizing that information which relates to an uncertain outcome, such as intermediate stages in negotiations, can be inside information under REMIT if it is likely to significantly affect prices."