The Competition & Markets Authority (CMA) has dismissed SSE’s appeal against Ofgem’s approval of a code modification removing residual transmission charges from generators.
SSE lodged its appeal in January, saying Ofgem had based its decision on “flawed and incorrect technical application of the rules” that would “unfairly burden generators with increased costs”.
However, the CMA has now determined that Ofgem’s decision is likely to better ensure charges in 2021/22 are within the range permitted under retained EU law. It pointed to the regulator’s acceptance that the changes were “imperfect” and its direction to the Electricity System Operator (ESO) that a new approach would be needed beyond 2022.
The CMA concluded that Ofgem’s approach made the chances of a breach of law less likely.
SSE said it was considering its next steps, adding: “We are disappointed by this decision as we felt the proposed changes were based on a flawed application of the law which will unfairly burden generators with increased costs, undermining low carbon investment and the UK’s net zero ambitions.”
In February, both the ESO and Centrica issued statements to the CMA supporting Ofgem’s approach and objecting to SSE’s appeal.
A summary of the arguments can be found here.
SSE sees renewables output shrink
Meanwhile, SSE this morning (30 March) issued an update to the City ahead of the end of its financial year tomorrow.
It warned that it is likely to report a worse than expected shortfall in output from renewable sources. The level was five per cent below plan for the nine months to 31 December but as of 23 March was down around nine per cent, as a result of weather conditions.
However, the company said the impact of coronavirus on adjusted operating profit would be less severe than feared – at around £180 million, compared to the worst-case scenario of £250 million.
In light of the this, SSE expects to report adjusted earnings per share in the range of 85p to 90p for the full year. Net debt is expected to be around £9 billion at year end.
Updating on key developments throughout the year, the company said it was making good progress on its target run rate of at least 1GW (net) of new renewables assets a year during the second half of the decade.
SSE it was currently “progressing options” for the divestment of its 33 per cent stake in gas distribution network SGN and expected to update on its approach and timings at its results presentation on 26 May.
The company cited the potential impact of SGN’s appeal of certain elements of Ofgem’s RIIO2 final determination as one factor being assessed. SSE’s transmission arm has also issued an appeal to the CMA on elements of its final determination.
Finance director Gregor Alexander said: “While we have made a narrow appeal to the CMA on certain technical elements of Ofgem’s RIIO-T2 price control settlement, we are now getting on with delivering against our progressive business plan whilst building a compelling plan for the ED2 price control, which will be vital to delivery of net zero at the local level.”