National Grid hit by Ofgem fine over gas leak failures

Regulator Ofgem has hit energy company National Grid with a £3m fine and limited the revenue it can earn from its gas distribution networks by £2m after the company's failure to meet repair and customer satisfaction targets.

The FTSE 100 company has agreed with Ofgem to pay £3m, which will be given to fuel poverty charity National Energy Action, after it failed to meet the target for repairing non-urgent gas escapes on its gas distribution networks.

The energy giant confirmed last year that it plans to sell its four remaining gas distribution operations, 11 years after it first sold half its of the gas distribution network.

National Grid assured that no lives were put at risk by the repair failures but was found to have missed the target for carrying out non-urgent repairs on three of its four distribution networks for two years 2013/14 and 2014/15.

Ofgem also trimmed the amount of revenue National Grid can earn from its gas distribution networks by £2m after it failed to meet targets on customer satisfaction.

“National Grid recognises that it did not have proper management processes in place to meet these targets," said Maxine Frerk, Ofgem's acting senior partner, networks.

"National Grid has assured Ofgem that it has taken sufficient action to ensure they can be achieved in the future. This pay-out is a signal to all energy network companies that they must meet outputs in their price control and deliver good service for customers.”

National Grid's outgoing chief executive Steve Holliday, who announced in November that he will retire by the March financial year end, has been weighing up whether to pursue an outright sale of the remaining UK gas distribution assets or go for a piecemeal deal.

The company said the process will start in the second half of the financial year and will most likely be completed in early 2017, with most of the proceeds returned to shareholders.