By Claire West

Ofgem has announced that it intends to impose a penalty of £8m and to find National Grid Gas in breach of licence obligations on providing accurate information to the energy regulator.

This covers the reporting period 2005/06 to 2007/08. Ofgem takes failures by regulated companies to meet reporting obligations very seriously. This is an important part of ensuring that the „regulatory contract‟ is met and consumers receive value for money. In 2006 and 2007 Ofgem‟s Chairman, Lord Mogg, wrote to all network companies to emphasise the
importance of accurate regulatory reporting, in response to which the Chairman of National Grid plc gave assurances about the quality and integrity of National Grid‟s systems of internal control.

The proposed level of penalty on National Grid Gas would have been higher had it not been for the action NGG took first in bringing the misreporting to Ofgem‟s attention quickly, and subsequently in its co-operation with the investigation and actions to put things right.

National Grid has not benefitted financially from the misreporting and any consumer detriment has already been corrected.

The matter came to light when a whistleblower brought misreporting on the gas mains replacement programme to National Grid‟s attention. National Grid immediately informed Ofgem of the issue and co-operated with Ofgem‟s investigation, appointing Ernst and Young to investigate the extent of the misreporting to the regulator and National Grid. The misreporting relates to data National Grid must provide to Ofgem on its progress in completing works for a
mains replacement programme.

Lord Mogg, Chairman of Ofgem said: “Ofgem‟s work to ensure consumers receive value for money for network investment and replacement relies heavily on receiving accurate reportingfrom companies. Ofgem‟s actions today reinforce our strong message to all energy companies
that misreporting cannot and will not be tolerated.”
“National Grid has co-operated with our investigation, has accepted our proposed findings, and is taking action to seek to ensure this does not happen again. The penalty we are proposing to impose reflects this and would have been much higher otherwise.”

Breaches by National Grid Gas involve different forms of inaccurate reporting and weaknesses in processes, procedures and management oversight on the mains replacement programme. National Grid has put in place a plan to improve its systems, processes and procedures and will be providing evidence to Ofgem that the plan has been implemented effectively.