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National Grid has been fined £41.6 million for breaking competition laws, the energy watchdog Ofgem has announced.

The watchdog claimed National Grid violated regulations regarding the supply of gas metres in homes.

In a statement Ofgem's chairman Sir John Mogg described it as a "serious breach" of the laws.

"The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart metres," he said today.

When the metering market was opened up to competition, National Grid signed long-term contracts with five of the six major energy suppliers to fit and maintain gas metres.

Within the deals, however, there were financial penalties if the suppliers replaced more than the few metres allowed by National Grid.

Ofgem claimed that these penalties restricted the rate at which the energy suppliers could replace National Grid metres with cheaper and more technically advanced ones from rival operators.

The Ofgem statement read: "By restricting competition, National Grid has deprived gas suppliers and customers access to lower prices and improved service.

"Furthermore, it has curbed innovation in the provision and maintenance of domestic-sized metering," the watchdog said.

The £41.6 million fine was a result of National Grid acting in a way that restriction competition and harmed customers, Ofgem claimed.

In response, National Grid said there was no evidence that consumers had been harmed and an appeal would be lodged shortly.