In 2002, National Grid merged with gas company Transco and this resulted in National Grid inheriting its position in the gas metering market.
At this time, the metering market was opening up to competition. We believed the new and replacement meter market would be the starting point for competition, and therefore spent two years negotiating contracts with gas suppliers that differentiated between meters already installed and new or replacement meters.
In 2004 National Grid signed these new metering contracts with most of the major gas suppliers. The suppliers had the option of continuing with their existing arrangements or (under the new contracts) receiving lower metering prices in return for a commitment to leave National Grid’s meters in place for a specified period (or completing payment on them if they removed them before the end of the contracted period).
On the 24th June 2005, Ofgem announced that it was undertaking an investigation into the new contractual arrangements between National Grid and the gas suppliers concerning the provision of gas metering services.
Ofgem’s original allegation was that the contracts locked suppliers in for a significant share of their gas meter requirements and thereby restricted the development of competition in metering. Ofgem alleged that this conduct amounted to an abuse of dominance, which would infringe competition law. However, throughout the course of the investigation, this allegation narrowed and focused more on the technical aspects of the contracts rather than the contracts themselves.