This bug has been fixed in Release 14 Service Pack 2 (R14SP2). For previous releases, please read below for any possible workarounds:
We have verified that there is a bug in SimPowerSystems 3.1 (R14) in the way that PSBUPDATE handles models with blocks that have become obsolete in the new version.
To work around this issue, disable the library link for the block by right-clicking on the troublesome block and selecting Link Options->Disable Link. Once the model has been updated, you can replace this block with a newer block from the SimPowerSystems library.
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