National Grid fined £8m by Ofgem

National Grid has been hit with the second-largest fine ever to be doled out by Ofgem after the energy company claimed it had spent more on its maintenance programme than was actually the case.

The 8 million penalty reflected the fact that the overstatement on major replacement work between 2005 and 2008 could have led to higher gas bills for consumers. Ofgem takes this expenditure into account when its sets its controls on what price energy firms can charge for gas and electricity.

The breaches included reporting work which had yet to be done, and claiming twice for work completed. The inaccuracies were initially reported by a whistleblower to senior management within National Grid.

This latest fine from Ofgem is second only to the 15m paid by National Grid last year for abusing its dominance over domestic gas meters when the market was opened to competition in 2003. That fine was initially set at 41.6m, but was reduced after two years of appeals by National Grid.

Ofgem chairman Lord Mogg said National Grid had not benefited financially from the misreporting, and any "consumer detriment" had been rectified. Left unchecked, the misreporting could have made 3m for National Grid.

"Ofgem's work to ensure consumers receive value for money for network investment and replacement relies heavily on receiving accurate reporting form companies," Mogg said. "Ofgem's actions today reinforce our strong message to all energy companies that misreporting cannot and will not be tolerated."

He added that the company had co-operated with Ofgem's investigation, and was taking steps to ensure that nothing of this sort happens again. Accepting Ofgem's proposed decision, National Grid executive director Mark Fairbairn said he was "disappointed" that such a matter should ever have arisen.

"National Grid prides itself on the professionalism and integrity of its workforce and we take very seriously any instances which fall short of our high standards," Fairbairn said.

"We are glad that we have been able to work constructively and professionally with Ofgem in this investigation and in dealing with its outcomes."

National Grid is responsible for delivering gas to roughly 11 million customers.

Richard Hall, energy expert at watchdog Consumer Focus, said the fine sent a welcome message about the consequences for energy firms that break the rules.

"The need for robust monitoring by Ofgem is going to become even more important as billions of pounds in necessary energy investment is passed onto customers," he said.

"Our research shows that customers already have little faith that they are getting a fair deal on energy prices. Unless there is a major injection of transparency across the whole energy sector, it will remain impossible for customers to tell whether bills are fair and the market is working properly."