SSE has paid £100,000 after the energy watchdog found that the company overcharged fees at six of its power stations including three in Perthshire.
The Perth-based company breached a payments system designed to prevent electricity generators from exploiting the market.
Energy regulator Ofgem secured the £100,000, which will go to Energy Action Scotland to tackle fuel poverty.
Constraint payments help National Grid balance demand and supply on the energy network. At times of high or low demand, National Grid asks for generators to submit bids to increase or decrease supply, but rules were introduced to prevent electricity generators from exploiting market conditions and charging excessive prices.
In January last year SSE submitted increased offers to National Grid to reduce generation at six cascade hydro systems including Clunie, Garry and Killin in Perthshire, due to a flood risk.
SSE maintained the level for longer than necessary, resulting in National Grid paying more than it should have to reduce generation from the stations.
Rachel Fletcher of Ofgem said: “We’ve had concerns about practices in this area and we are actively monitoring generators to ensure they are playing by the rules.
“Given SSE’s admission to its failure, its action to make amends and the small scale of the breach, Ofgem believes the £100,000 payment is the right level of penalty and will not take further action.”
The winter of 2013/14 was the wettest on record in Scotland, and created an overspill risk at SSE’s cascade schemes.
SSE adjusted the price of energy generated to keep the stations operating, in order to channel water away from reservoirs and prevent flooding.
Due to an internal oversight, SSE failed to review its bid prices in a timely manner after the flood risk reduced.
This resulted in SSE maintaining an elevated constraint price signal to Grid for longer than was necessary.
The excess payment made to SSE was under £50,000, and in recognition the company agreed to pay £100,000 to Energy Action Scotland.
Paul Smith, managing director of SSE, commented: “Cascade hydro presents unique pricing challenges due to the complexities associated with operating the plant.
“We will look to improve our internal processes and engage more closely with the regulator in future on matters relating to cascade hydro pricing in order to ensure we are complying with our licence conditions at all times.”
The fine comes after Ofgem launched an investigation into whether SSE put its competitors at a disadvantage in the electricity connections market.
l SSE announced that chairman Lord Robert Smith of Kelvin has brought forward his departure to become chairman of specialist engineering company IMI Plc.
He is expected to step down at the end of SSE’s annual general meeting on July 23.
He will be replaced by deputy chairman Richard Gillingwater, subject to his re-election.
Previously chairman of Weir Group, Lord Smith has also served on the boards of 3i, Bank of Scotland and Network Rail.