Martin Williams Senior News Reporter
SSE has come under fire by the energy regulator after losing a compensation
claim which would have given some of the country’s biggest power providers
a £120 million consumer-funded rebate.
The Competition and Markets Authority upheld a decision by the regulator
Ofgem which rejected the claim saying it would have been unfair on
consumers who would ultimately pay for it through rising energy bills.
The decision from Ofgem came after the Perth-based company, one of the Big
Six energy suppliers, submitted a rebate claim in March, 2016 seeking
compensation for costs paid to connect offshore wind farms to the UK power
network.
The dispute surrounds the charges paid by electricity-generating companies
for use of the transmission system, and SSE argued generators in the UK had
paid more in charges than the 2.50 euro megawatts per hour average limit
permissible under European Union law.
Ofgem rejected the claim on the grounds that most, if not all, so-called
local network charges, which mainly relate to transmission links connecting
offshore wind farms to the grid, should be excluded from this cap.
Now SSE and EDF Energy has lost an appeal against Ofgem’s decision.
And Ofgem has criticised the appeal saying both firms should have instead
been concentrating on providing a better deal for consumers. SSE argued
that British generators had paid more in transmission charges in 2015/16
than the maximum permissible under EU law.
SSE and EDF disputed the Ofgem decision arguing there was no exclusion from
the EU cap on transmission charges for the cost of connections between
offshore wind farms and the onshore grid.
The CMA concluded that – applying the correct approach to EU law – there
was such an exclusion and therefore there had not been a breach of the cap
and Ofgem was entitled to reject the request.
Andrew Wright, senior partner at Ofgem, said: “It is good news for
consumers that the CMA has upheld Ofgem’s decision. If the modification had
gone ahead, it is likely that the rebate would have cost consumers up to
£120 million and led to further payments to larger generators in the longer
term.
“It is disappointing that SSE and EDF challenged our decision. The energy
market is under close scrutiny and companies should be working hard to
deliver a better deal for customers rather than seeking additional revenues
that will add to customers’ bills.”
An Ofgem spokesman added: “We remain committed to working constructively
with the entire industry to deliver an energy system that is fit for
purpose for the future and continues to deliver significant benefits for
consumers.”
A spokesman for SSE, which in 2008 became joint owner of what would at that
time was said to be the world’s largest offshore wind farm, Greater
Gabbard, said: “We are disappointed by the decision of the CMA to refuse
the appeal lodged against Ofgem’s decision not to grant the CMP261
modification. SSE, together with EDF Energy, will now review the CMA’s
decision in detail.”
It comes as legislation designed to cap “poor-value” energy tariffs for 11
million British households was introduced to Parliament on Monday, after a
2016 report by the CMA found consumers were contributing to £1.4 billion in
excess profits to energy companies via standard variable tariffs (SVTs).
Prime Minister Theresa May said the Bill – which the Government hopes will
become law before next winter – would “force energy companies to change
their ways”.
The so-called Domestic Gas and Electricity (Tariff Cap) Bill would allow
Ofgem to limit tariffs until 2020, with the option to extend the cap
annually until 2023.
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