SSE code modifications appeal

First published by Author on November 03, 2021 in the following categories: Industry Pricing and tagged with cma | energy | pricing

Earlier this year, the Competition and Markets Authority (CMA) granted an appeal involving SSE (Scottish & Southern Energy) to review energy code modifications decided by Ofgem, the UK government’s energy regulator. The SSE code modifications appeal reportedly takes issue with Ofgem’s move to ensure rules about charges to use the electricity transmission network are properly applied.

Ofgem asserts that the rule is currently being misinterpreted, meaning that customers are currently paying over the odds as energy generators are taking their money to cover transmission charges. Hearings have been set to take place this year.

The SSE code modifications appeal is based on the energy company’s belief that Ofgem is incorrectly applying the rules surrounding transmission charges. According to SSE, the cut to company returns made by the increased costs could mean that energy generators may find it harder to meet the UK’s ambition of achieving net-zero emissions by 2050.

What does the SSE code modifications appeal mean for consumers?

If successful, the SSE code modifications appeal could undermine the perceived and reported positive effects of Ofgem’s decision for consumers. Under Ofgem’s new modifications, consumers could save £2.3bn on their bills over five years, understood to have been from April 2021. Ofgem has already revised the cap to try and accommodate network operators, meaning each customer could only save £10 a year compared to the £20 suggested in their initial proposal.

SSE has reportedly long been benefiting from significant returns as one of the biggest network operators in the UK. However, their main argument against the cuts seems to be the impact on the UK’s net-zero emissions target, which they believe they need more investment for if the goal is to be achieved. The dispute appears to reflect a need to balance consumer costs, industry profits and environmental targets.

Previous CMA appeals

A similar appeal was made by SSE and EDF in 2017 against another Ofgem decision. The two companies decided to launch appeals with the CMA after Ofgem rejected their challenge to industry regulations. Again, the dispute concerned the transmission fees that are paid by energy generators to use electricity transmission systems. The two companies argued that Ofgem had breached the EU cap on transmission charges, but the CMA eventually rejected this appeal.

The more recent SSE code modifications appeal shows that the energy companies continue to be frustrated about the costs imposed on them. Meanwhile, Ofgem appears to have maintained their position that energy companies like SSE are allegedly seeking further revenues that will come at the expense of higher costs for customers.

The Competition Lawyers and consumer rights

As one of the most taxing everyday expenses, electricity and its providers must always be monitored carefully. At The Competition Lawyers, we hope that the CMA will continue to favour consumer rights in the upcoming SSE code modifications appeal proceedings. The CMA is not just there to ensure businesses engage in fair competition that is in accordance with the law, it is also there to make sure businesses give customers fair deals.

This is another key matter that our legal team will be keeping a very close eye on over the course of the appeals and discussions.