Ofgem said the energy network’s behaviour had infringed the Competition Act and hampered efforts to extend the use of smart metering – technology which gives users and producers real time information about energy use, cost and its potential carbon footprint.
Sir John Moog, Ofgem chairman, said: “Ofgem has imposed a substantial fine on National Grid for a serious breach of competition law. National Grid has abused its dominance in the domestic gas metering market, restricting competition and harming consumers.
“The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart meters.”
But National Grid, which provides metering for 18 million customers, insists it has helped build a competitive market.
The company says it did not infringe competition law and is lodging an appeal against the fine the Competition Appeal Tribunal.
Steve Holliday, National Grid chief executive, said: '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.
“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.”
Ofgem claimed the company breached competition law due to the nature of its long term contracts with five of the six major energy suppliers to supply and maintain gas meters.
These contracts included financial penalties for suppliers who replaced more than the small number of meters allowed under the contract with National Grid.
As a result the regulator says this “severely restricted” the rate at which old meters could be replaced by cheaper or more advanced meters from rival meter operators.
National Grid said contracts were voluntarily entered into by gas suppliers and delivered substantial reductions in charges for meter services. It argues Ofgem was consulted throughout this process.