SSE and EDF appeal £120m grid rebate decision

SSE and EDF Energy have lodged an appeal with the Competition and Markets Authority against an Ofgem decision to refuse a £120 million rebate on network charges for generators.

The regulator says electricity consumers will be “disappointed” by the appeal and has vowed to defend its decision.

SSE and EDF Energy believe Transmission Network Use of System Charges (TNUoS) in 2015/16 exceeded an average annual cap of €2.50/MWh set by an EU directive.

In March 2016, SSE submitted a modification to the Connection and Use of System Code (CUSC) called CMP 261, which would have returned the alleged overpayment through an £120 million rebate.

Two alternative versions of the modification were approved by the CUSC panel at a meeting in June.

However, Ofgem disagreed with the panel’s recommendations and rejected the modifications last month on the basis that the cap had not actually been breached. The decision rested on the regulator’s interpretation of an exemption within the EU directive for charges covering the connection of generation assets to the transmission network.

SSE and EDF have now appealed against the ruling.

In a statement, SSE said the TNUoS charges paid by generators in 2015/16 averaged around €3.25/MWh, meaning they exceeded the regulatory limit by more than a quarter.

“As a result, SSE, together with EDF Energy, will now appeal Ofgem’s decision on CMP261 to the CMA.”

EDF Energy said generators were “overcharged for using the national transmission system in 2015/16 and that this is unlawful. We are jointly appealing with SSE against Ofgem’s decision not to refund these extra charges”.

“Stable regulation is essential in giving suppliers and investors confidence in the UK electricity market and it is important that rules are applied fairly and consistently,” added EDF Enery. “If Ofgem’s decision is not reversed, it risks creating uncertainty in the electricity market.”

Responding to the appeal, Ofgem said: “Electricity consumers will be disappointed to learn that SSE and EDF Energy have chosen to appeal our decision to reject proposals for a rebate of network charges that is likely to cost consumers up to £120 million and lead to increasing payments to larger generators in the longer term.

“Ofgem’s decision is a sensible interpretation of European Union regulations and is in the interests of consumers. We will robustly defend our decision at the Competition and Markets Authority.”