The energy regulator has launched an investigation into Scottish and Southern Energy (SSE) and Scottish Power following a complaint alleging abuse of dominant market positions.

Ofgem declined to identify the complainant, but said that its decision was “based on a formal complaint alleging abuse of a dominant position in the electricity generation sector arising from constrained capacity on the transmission network, as well as informal inquiries”.

The investigation is likely to focus on Britain’s electricity transmission and trading network, and on whether the two companies have benefited from bottlenecks in the system.

Scottish Power, owned by Spanish energy group Iberdrola, and SSE dominate the Scottish electricity market, along with British Energy, the nuclear power generator.

They all export some electricity south of the border to England and Wales – a pro-cess opened up following the launch four years ago of the UK-wide power-trading scheme, dubbed Betta. However, power traders said capacity constraints were an issue at the border.

“I don’t know who complained, but it is not a massive surprise as there is a constraint on the interconnector at the moment,” one UK power trader said.

Fuel poverty battle goes to court
Campaign groups supporting the elderly and the environment are banding together to sue the government over its alleged failure to tackle fuel poverty, writes Megan Murphy.

Friends of the Earth and Help the Aged are seeking a judicial review of the government’s existing fuel poverty strategy, labelling it “a fiasco” that has left nearly 3m households struggling to heat their homes. In spite of pledges to wipe out fuel poverty for the most vulnerable households by 2010, ministers have admitted that about 1.2m poorer families, pensioners and other exposed groups are still expected to be struggling by that date – approximately the same number as in 2001.

The decision by the campaign groups to take formal legal action ratchets up the pressure on both the government and suppliers to mitigate spiralling energy costs that have forced thousands more people into fuel poverty.
The two companies said they were confident in the validity of their operations.

“No specific allegations have yet been put to SSE, but we are confident that our actions in the electricity generation market have always been justifiable in economic terms and consistent with ... a competitive market,” said SSE.

Scottish Power said: “We are confident that our participation in the constrained market has been lawful and appropriate at all times, and we will, of course, fully co-operate with Ofgem’s investigation.”

Ofgem said it was too early to say how the investigation would develop.

“It’s serious: the regulators have launched an investigation, whether it has serious consequences for the companies is impossible to say. We don’t know what we’re going to find ... this is the firing of a starting gun,” said Ofgem.

Asked how long the investigation might take, the regulator said: “It may be closed very quickly and we find there’s no case to answer, but the National Grid investigation went on for three years.”

National Grid recently received a record £41.6m fine after it was accused of hindering the roll-out of new “smart” meters. Ofgem said agreements with energy suppliers prevented other businesses from replacing older equipment.

The regulator said the investigation was separate from a probe it launched in February into the relationship between retail and wholesale energy prices, amid growing concern about rising costs for households.