The first fine relating to the publication of inside information in energy markets in GB and the EU, according to the regulator, ‘sends a strong message to SSE, and other wholesale energy market participants, about the importance of fully complying with REMIT rules.’
Under the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), ‘inside information’ is information which is likely to significantly affect the price of wholesale energy.
Market participants must publish inside information in an ‘effective and timely’ manner.
On 22 March 2016, SSE signed a non-binding Heads of Terms agreement with National Grid (NGET) to provide ‘Black Start’ capability at any one of three generating units at its Fiddler’s Ferry power station from 1 April that year.
Previously, SSE had announced that the units were likely to close from that date.
With a combined generating capacity equivalent to 3% of GB peak electricity demand, these units had a significant impact on GB demand and supply, affecting wholesale prices.
Ofgem’s investigation found that SSE’s non-binding agreement with NGET on 22 March 2016, and its decision to retain Transmission Entry Capacity for the three units on that date, reversed the likelihood that the three units would close.
Consequently, the agreement was likely to have a significant effect on wholesale prices, and was therefore inside information.
SSE did not publish this information in a timely manner.
Instead it waited until the 30 March 2016 to make an announcement once it had finalised the contract.
SSE’s 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.
It is likely this led to some market participants paying more for wholesale electricity than they should have.
The investigation found that whilst the company did consider whether it was in possession of inside information on 22 March 2016, it failed to reach the correct conclusion and publish on that date.
In the course of its investigation Ofgem did not find evidence that SSE acted in bad faith.
In reaching this decision, the regulator has taken 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.
Future failures to publish inside information in an effective and timely manner are likely to result in higher penalties.
SSE fully co-operated with Ofgem’s investigation.
By settling this investigation early, the company has qualified for a 30% discount for early settlement from the proposed approximate £2.6 million penalty.
Jonathan Brearley, chief executive at Ofgem, commented on the findings: “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.”
According to Ofgem, the finding highlights ‘the importance for companies of recognising that information which relates to an uncertain outcome, such as intermediate stages in negotiations, can be inside information under REMIT if it is likely to significantly affect prices.’
As such, it must be published in a timely and effective manner.