SSE has said it will keep Fiddler’s Ferry open until at least March 2017, and announced the signing of a new one-year contract for the coal-fired power plant to provide ancillary services to National Grid.

At the beginning of February the big six supplier said it expected to close three of the four units at the plant at the end of March – subject to a consultation with employees – because of “challenging economic and environmental conditions for coal”.

However, it has now said it has retained transmission entry capacity for the station of 1,445 MW for 2016/17 – equal to the capacity of the three units – enabling their continued participation in the energy market. SSE has also announced that a new one-year contract had been signed for one of the three units to provide “ancilliary services” to National Grid.

The fourth unit will join the supplemental balancing reserve (SBR) for the coming winter as expected. The signing of the contract was announced earlier this month by National Grid.

SSE managing director of wholesale Martin Pibworth said: “The longer term future of the site remains uncertain but we are very pleased to have secured this 12 month contract. We will continue our consultation with employees as we complete our review of the operational requirements of the station.” SSE currently employs 213 people at the site.

Earlier this month the government announced plans to end the SBR a year early – bringing forward the start of the capacity mechanism to the winter of 2017/18 and holding an extra year-ahead auction this winter. SSE said it plans to enter all or part of the plant into this auction.

The supplier secured contracts for three of the four units for the winter of 2018/19 in the first capacity auction in 2014. It said previously it would incur penalties of £33 million if it did press ahead with the closure of three units this March. SSE declined to comment on what is happening with these contracts. 

Policy analyst at environmental campaign group Sandbag Dave Jones told Utility Week:  “I think it would be fair to speculate that there’s been a complete u-turn by Fiddler’s Ferry and they’re now going to be open as long as 2019. That’s what this sounds like to me.

“I think probably one of their reasons for staying open is they’re expecting a higher price in this December’s auction for the winter of 2020/21. It may be that they end up going in to that as well.”

Earlier this week former chief executive of RWE npower Paul Massara said the government will be forced to come up with another mechanism to get new gas power stations built as the capacity market “isn’t working”.

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