SSE has become the first energy company to be penalised under REMIT for failing to publish inside information about the availability of its generation capacity.
Announcing it had fined the company £2.06 million this morning (3 September), Ofgem said the breach was likely to have had had a significant effect on wholesale electricity prices.
Under the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), market participants must publish inside information that is likely to “significantly affect” the price of wholesale energy in an “effective and timely” manner.
The fine relates to a non-binding heads of terms agreement that SSE signed with National Grid on 22 March 2016. The agreement set out terms by which it will provide black start – the capability to recover from a total or partial shutdown of the transmission system – at any of its three generating units at Fiddler’s Ferry power station from 1 April that year.
SSE had previously announced that the coal units were likely to close from that date.
The units at Fiddler’s Ferry had a combined generating capacity equivalent to 3 per cent of GB peak electricity demand, meaning they had a significant impact on supply and demand, affecting wholesale prices.
An investigation by the regulator found that SSE’s agreement with National Grid and its decision to retain its commercial right to export power onto the grid reversed the likelihood that the three units would close and consequently, the agreement was likely to have a significant effect on wholesale prices and was therefore inside information.
SSE did not publish the information in a timely manner and instead waited until the 30 March 2016 to make an announcement once it had finalised the contract.
The 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. Ofgem said it is likely this led to some market participants paying more for wholesale electricity than they should have.
Ofgem found that while SSE did consider whether it was in possession of inside information on 22 March 2016, it did not reach the correct conclusion and publish on that date. The regulator added it did not find evidence that SSE had acted in bad faith.
In reaching its decision to impose the fine, Ofgem took 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.
Jonathan Brearley, chief executive at Ofgem, 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.”
Commenting on Ofgem’s finding, SSE energy director Martin Pibworth said: “SSE takes its market disclosures extremely seriously and acted in good faith, publishing details of the black start contract for Fiddler’s Ferry power station once signed, in line with our 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.
“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.”