The energy regulator has slapped a collective fine of more than £5m on companies that have failed to tackle gas leaks on time in the latest setback for the embattled sector.
National Grid Gas has to pay £4.3m and Northern Gas Networks £900,000 in what Ofgem said was a "clear message" that companies must meet their commitments. "Consumers pay for these important service standards and have a right to expect they will be met," said Rachel Fletcher, senior partner for distribution at Ofgem.
"The announcement sends a clear message to energy network companies that they risk a financial penalty from Ofgem if they don't meet their obligations to uphold Britain's high standards in responding to gas escapes on time." Ofgem said the penalties would have been harsher were it not for the fact that both companies had taken steps to ensure that they have sufficient resources available this winter.
Between April 2010 and 31 March 2011, National Grid Gas and Northern Gas Networks failed to meet the target of responding to 97% of controlled and uncontrolled gas escapes within time limits. National Grid Gas reached between 92.1% and 96.1% of uncontrolled gas escapes in all four of its regional businesses. It also reached 96.8% and 95.1% of controlled gas escapes in two of their four networks within the time limits. The company, which reported first half, pre-tax, profits of nearly £1bn last month, argued that last winter was one of the harshest seen for many years and its teams worked extremely hard in difficult conditions.
"We missed our target and told Ofgem as soon as we knew this would be the case, working closely with them during their investigation," said John Pettigrew, chief operating officer of National Grid Gas's distribution business. "We take our responsibility to attend and manage gas escapes very seriously, and we have learned lessons from last year that we have embedded into the improved plans we have put in place for this coming winter," he added.
The fine is another blow for the company which, last week, lost a £26m-a-year contract to run the Long Island electricity system in New York state after 13 years, amid an investigation into overcharging for its American services.
In addition, it also comes at a difficult time for the "big six" energy companies, such as nPower in Britain, which are served by National Grid Gas and which have been under assault from Ofgem for a range of perceived failings.
Northern Gas Networks, in which Hong-Kong listed Cheung Kong Infrastructure holds a 47.1% stake, said it had responded to 91.6% of uncontrolled gas leaks within the one-hour target and 94.3% of controlled cases."We have completed a thorough review of our business and resources and put the lessons learned into a new plan for this winter," added, Mark Horsley, chief executive of Northern Gas Networks.
Ofgem is expected to come up with a range of new initiatives in the new year that will see a major shake-up in the energy sector after growing complaints from customers and politicians over the alleged abuse of its dominant position.