Ofgem fines National Grid £41.6m
February 25, 2008
National Grid has been fined £41.6m by energy regulator Ofgem for restricting the development of competition in the domestic gas meter market.
Ofgem said the company had committed "a serious breach of competition law".
It said National Grid's actions had prevented gas suppliers from contracting with other firms for cheaper metering deals.
National Grid, which operates the UK's main gas pipeline system, has said it will appeal against the decision.
The company is also responsible for the UK's long distance electricity transmission network.
'Voluntary agreements'
Ofgem's decision relates to a number of metering contracts National Grid entered into with gas suppliers in 2004.
"These contracts were negotiated over a two year period, were voluntarily entered into by gas suppliers and delivered immediate and substantial reductions in charges for meter services, saving customers around £120m over the four years of their operation," said National Grid.
"Ofgem was consulted throughout this process of contract development and negotiation and has acknowledged that National Grid had no intention to breach the Competition Act."
Ofgem counters that under the terms of National Grid's contracts, suppliers wrongly faced penalties if they replaced over a certain number of gas meters.
"National Grid has abused its dominance in the domestic gas metering market, restricting competition and harming consumers," said Ofgem chairman Sir John Mogg.
Ofgem has been a strong advocate of "smart metering" which show customers how much they can save by reducing their energy consumption.
The UK's gas distribution system was formerly run by Transco after the privatisation of British Gas.
In 2002 its parent company, Lattice Group, merged with National Grid.
The new company was first called National Grid Transco, before being shortened to National Grid in 2005.
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