Scottish & Southern Energy, one of Britain’s largest power companies, has deliberately cut the amount of electricity generated by some of its plants to qualify for multimillion-pound subsidies meant for smaller new energy projects.

The company is collecting subsidies worth tens of millions of pounds each year for profitable small hydroelectric schemes, most of which were built in the 1950s with taxpayers’ money.

At seven plants run by Scottish & Southern, new, smaller turbines were installed that were designed to generate less electricity so that the plants could qualify for extra funding.

The subsidies were designed to channel fresh investment into renewable energy projects, such as tidal power and wind farms.

Nick Dekker, a campaigner who has lodged a petition with the Scottish Parliament to scrap the subsidies, said: “It’s a licence to print money.”

Since the scheme started in 2002, the company has collected more than £100 million in subsidies for about 60 hydroelectric schemes that qualify because they generate less than 20 megawatts of electricity.

Although many were old and uneconomic, Scottish & Southern lobbied hard for them to be included in the programme, saying that unless money could be found to refurbish them, they would be at risk of closure. As a result they were kept open and qualified for annual subsidies, despite costing almost nothing to run.

However, at some of the plants, including Finlarig, Mossford, Quoich, Shin, St Fillans and Grudie, modifications were made deliberately to reduce their generating capacity below the 20-megawatts threshold to gain accreditation as a “small” plant.

Hydropower schemes tend to be costly to build initially but they subsequently are extremely cheap to operate, although they do require refitting with new turbines every 25 to 30 years. During the 1980s and 1990s small Scottish hydro schemes were producing some of the cheapest electricity in Britain, often at less than half the cost of oil or coal-fired stations.

Estimates compiled using data from Ofgem, the industry regulator, suggest that Finlarig, which was built in 1955, has been granted subsidies worth more than £14 million since 2002. The plant at Quoich has qualified for more than £22 million.

David Williams, chief executive of the British Hydropower Association, believes that the subsidies, which come directly out of consumers’ electricity bills, are necessary and justified.

“Without an incentive like this, these plants would have been decommissioned,” he said. However, he admitted that once refurbished the operating costs of the plants was “almost nothing”.

A spokeswoman for Scottish & Southern, which has 8.45 million customers, said that since 2002 it had invested more than £300 million in extending the life of hydropower schemes in Scotland and improving their efficiency.

“This means there is more output from Scotland’s hydroelectric schemes than otherwise would have been the case,” she said, adding that the funds were being ploughed back into other renewable energy schemes.

In August, Scottish & Southern raised its electricity prices by 19 per cent after a 14 per cent rise in April.

Another company, ScottishPower, also operates a smaller number of hydro plants that qualify for the subsidies. It denied that it had reduced the capacity of any of them to qualify for the scheme.

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