The owner of Ferrybridge Power Station in West Yorkshire is one of two companies facing an investigation after the energy regulator promised to look at a complaint alleging abuse of a dominant market position.
Ofgem said it had launched its inquiry into Scottish & Southern Energy under section 18 of the Competition Act. It is also investigating Scottish Power, which is owned Spain's Iberdrola.
It said the decision was based on a formal complaint allegin
g abuse of a dominant position in the electricity generation sector arising from constrained capacity on the transmission network. It did not provide further details.
The investigation is completely separate from the probe into the energy supply markets which Ofgem launched in February.
Scottish & Southern Energy is one of the largest energy companies in the UK. It is involved in the generation, transmission, distribution and supply of electricity, as well as energy trading, the storage, distribution and supply of gas, electrical and utility contracting and telecoms.
The company trades as Southern Electric, Scottish Hydro Electric and Swalec.
SSE said today: "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 the operation of a competitive market.
"With any Competition Act investigation there is a process to be followed and we will cooperate fully with Ofgem throughout this process in order to bring it to a speedy conclusion."
Scottish Power, which has five million gas and electricity customers, said it was confident its participation in the market had been "lawful and appropriate at all times".
A spokesman added: "We will of course co-operate fully with the Ofgem investigation."
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