The Perth-based FTSE 100 company had substantially hiked its charges for lowering output from its hydroelectric plant at Loch Ness in May 2020, a move that Ofgem judged was designed to increase profits.

The investigation into SSE’s practices was prompted by accusations of energy companies exploiting the “balancing mechanism” of payments used to ensure the electricity grid can match supply and demand.

Bloomberg reported that energy firms, including SSE, had garnered more than £500m via trading methods that were seen to misuse the balancing system. It was discovered that SSE had profited £33m from its own plants and a further £87m from a facility co-owned with CK Infrastructure Holdings.

Although SSE maintained that its actions were “consistent with market rules”, Ofgem found the company had violated its licence agreement, which stipulates that it must not misuse its influence over the grid to impose extreme prices for balancing the network. The regulator deemed that this breach, while not deliberate, had led to higher costs for consumers. SSE was able to reduce the originally proposed fine of £11.58m to £9.78m by cooperatively engaging with the regulator and settling the investigation early.

The fine will be paid to the Energy Redress Fund, which aids individuals most vulnerable to high energy bills. Ofgem emphasised that this ruling sends a clear message to all generators to ensure their bid prices are set in a manner that does not result in disproportionate benefits during transmission constraint periods. SSE has pledged to implement a new pricing methodology to accurately reflect the costs and benefits of reducing its generation at the Foyers power station.

Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: “Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users.

“This enforcement action sends another strong signal to all generators that they must put in place controls to ensure that their bid prices are set in a way that ensures that they do not obtain excessive benefits during transmission constraint periods. If they fail to do so, they will face significant consequences.”