Ofgem finds National Grid metering contracts unlawful

National Grid announcement that it intends to appeal Ofgem's decision that metering contracts made with gas suppliers by its Transco unit in 2004 infringed competition law.

The decision does not seem to be on Ofgem's or OFT's website yet.

Update, later on 25 February 2008: Ofgem has released a summary (3 pages, PDF) of the decision and said that “the full decision document will be published ahead of the Easter break [i.e. 20 March 2008] once commercially confidential information has been removed”.

Update, 19 March 2008: decision document.

Comment 1: I know it is only a stock market notice, but National Grid's arguments do not really seem to address allegations of competition law infringement. It draws attention to the fact that suppliers were not coerced into the contracts — without addressing the likely claim that National Grid's market position made such coercion automatic and invisible. It denies intention to break the law, but does not deny any intention to tie customers, or negligence. I will not be surprised if the focus of the appeal is on the fine and perhaps on the OFT penalty guidelines: £41.6 million does seem quite big, although presumably it was calculated correctly in accordance with the guidelines. Franck

Comment 2: There is an Ofgem press notice (2 pages, PDF) which states that the decision was for abuse of dominant position and makes no allegation of breach of the Article 81 or the equivalent UK prohibition (which only came into force on 1 May 2005). Given National Grid's keenness to claim that the contracts “remain in full effect”, there might well be a threat of litigation from the suppliers in question. See Can a contract be void under Article 82? | viewpoint: Franck for a case with some similarities. Franck

For further information or advice please contact Franck Latrémolière.

Filed under Article 82, Gas, Media, Ofgem.

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