Ofgem fines National Grid £41.6m for breach of competition law

26 February 2008 / by Rachel Mason
UK energy regulator Ofgem has fined National Grid £41.6million for what it terms as a 'breach of competition law.' Ofgem says that the gas and power infrastructure company, which owns 19 million gas meters in the UK – about 86% of the entire market – has "restricted the development of competition in the domestic gas meter market".

“Ofgem has imposed a substantial fine on National Grid for a serious breach of competition law," explained Ofgem chairman, Sir John Mogg, "National Grid has abused its dominance in the domestic gas metering market, restricting competition and harming consumers."

Ofgem says that when the metering market was opened to competition, National Grid struck long-term contracts with five of the six major utility providers to supply and maintain gas meters.

"These contracts include financial penalties that apply if suppliers replaced more than the small number of meters allowed under the contract by National Grid," said Ofgem in a statement.

Ofgem says that National Grid has "severely restricted the rate at which suppliers can replace even National Grid’s older meters with cheaper or more advanced meters from rival meter operators."

National Grid says it is "extremely disappointed" with Ofgem's decision, saying that the 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."

National Grid argues that Ofgem was consulted throughout the process of contract development and negotiation, and says that Ofgem has "acknowledged that National Grid had no intention to breach the Competition Act"; it maintains that it has not infringed competition law, saying that the £41.6m fine is "wholly inappropriate."

"National Grid has been instrumental in helping Ofgem to develop competition in the UK metering industry, and we strongly believe we have never acted anti-competitively in the development of our contracts," said National Grid’s Chief Executive, Steve Holliday.

"Despite nearly three years of exhaustive analysis by Ofgem, we believe there is no evidence that National Grid has harmed consumers, competition or gas suppliers, and we are left with no option but to present our case to the Competition Appeal Tribunal.”

But Ofgem insists that by restricting competition, National Grid has deprived gas suppliers and customers of access to lower prices and improved service. "Furthermore", said Sir Mogg, "it has curbed innovation in the provision and maintenance of domestic–sized metering."

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