SSE agrees £100,000 payment to Energy Action Scotland over the operation of its hydro generating stations

SSE will pay £100,000 to charity following agreement with regulator Ofgem in response to a lapse in generation licensing compliance in 2014.

Cascade hydro systems are interactive reservoirs which produce energy from the accumulation of rainwater.

Winter 2013/14 was the wettest on record in Scotland, and extreme rainfall created an overspill risk for SSE’s cascade hydro plant. SSE elected to adjust the price of energy generated from this asset in a signal to National Grid to keep the stations operating where possible, in order to channel water away from the reservoirs and prevent any associated flood risk. Adjustment in price signalling is the standard method used by energy generators to communicate their generation preference with National Grid, which then balances the system by instructing generators to either increase or reduce their generation.

Due to an internal oversight, SSE failed to review its bid prices in a timely manner after the flood risk had reduced. This resulted in SSE maintaining an elevated constraint price signal to Grid for longer than was necessary. The signal extended into a subsequent period of transmission constraint which represented a breach of the Transmission Constraint Condition of SSE’s Generation Licence. The excess payment made to SSE as a result was under £50,000.

In recognition of this, SSE plc has agreed to pay £100,000 to Energy Action Scotland.

SSE will now work closely with Ofgem to discuss future steps to ensure that its pricing strategy for its hydro generation is capable of giving the necessary market signals to National Grid.

Paul Smith, Managing Director, Generation, of SSE commented:

“It is disappointing to have made a temporary pricing judgement that resulted in this non-compliance. Cascade hydro presents unique pricing challenges due to the complexities associated with operating the plant. We will look to improve our internal processes and engage more closely with the regulator in future on matters relating to cascade hydro pricing in order to ensure we are complying with our licence conditions at all times.”