Investigation into National Grid Electricity Transmission plc and its compliance with obligations under Section 9(2) of the Electricity Act 1989 and SLC B7(1) of its Electricity Transmission Licence in relation to the North Hyde substation

What this is about

Ofgem has opened a formal enforcement investigation into National Grid Electricity Transmission (NGET) over the 7 March 2025 fire and outage at the North Hyde 275kV substation in West London. The investigation runs in parallel with the publication of NESO's final report into the incident, which knocked out supplies to thousands of customers including Heathrow Airport and forced the airport to close for most of a day. Ofgem is testing whether NGET breached two specific obligations: Section 9(2) of the Electricity Act 1989, the foundational statutory duty on every transmission licensee to develop and maintain an efficient, coordinated and economical transmission system; and Standard Licence Condition B7(1), which requires the licensee to have the resources in place to carry on its transmission business properly and efficiently and to comply with the rest of its licence and the Act.

The substantive question is asset condition. A 275kV transmission supergrid transformer caught fire at a substation feeding a national strategic asset. If the investigation concludes that NGET's inspection, maintenance, or replacement regime fell short of what its licence requires, the case becomes the first significant test of the asset-stewardship limb of the transmission licence in the RIIO-2 era. The timing matters: RIIO-3 is being designed now, and a finding against NGET on B7(1) would change the political and regulatory weight given to TO asset-management plans, condition data, and replacement programmes in the next price control.

Key points

- Two distinct obligations are in scope. Section 9(2) is a statutory duty (efficient, coordinated, economical system; facilitating competition). SLC B7(1) is a licence condition (resources sufficient to carry on the business and comply with all other obligations). The two operate at different levels: 9(2) is the system-level outcome duty, B7(1) is the resourcing input duty. A breach finding against either would carry different implications. A 9(2) finding goes to system design and operation. A B7(1) finding goes to whether NGET equipped itself to do the job. - The trigger is the NESO final report. Ofgem has explicitly linked the investigation to NESO's same-day report. The report will be the evidential anchor for what failed at North Hyde, when, and why. Ofgem's case will lean heavily on whether NESO finds asset-condition issues that NGET should have caught. - The asset is a 275kV supergrid transformer. This is bulk transmission plant, not distribution. The loss of all supplies from a 275kV substation is a high-consequence failure: it is the kind of event the asset-replacement programmes inside RIIO are explicitly designed to prevent. If the cause sits in a known degradation pathway (transformer insulation, bushings, cooling), the question becomes why the relevant condition monitoring did not flag it. - Penalty exposure is material. Ofgem can impose financial penalties of up to 10% of relevant turnover for breach of a relevant condition or requirement under Section 27A of the Electricity Act. NGET's transmission revenue runs in the low billions, so the theoretical ceiling is in the hundreds of millions. The realistic range, based on past enforcement (Western Power Distribution £14.9m in 2021, SSEN-T cases, the NGESO cases under the old structure), is much lower, but the headline figure will be discussed publicly throughout the case. - No findings yet. Ofgem has been careful to state that opening the investigation does not imply non-compliance. That is standard practice and does not signal scepticism about the case; it protects due process. - Heathrow is the political amplifier. The investigation would have happened anyway, but the visibility of the Heathrow closure means the political ceiling on a low penalty has dropped. A finding of breach with a token fine would be hard to defend publicly.

What happens next

Ofgem investigations of this type typically run 12 to 24 months from opening to settlement or notice of contravention. Expect three phases. First, information gathering: Ofgem will use its Section 28 powers to require NGET to provide documents and records on the inspection history, maintenance regime, condition data, and replacement decisions for the North Hyde assets. Second, a provisional view, often communicated via a Statement of Case to NGET. Third, either a settlement (the usual route, with a discounted penalty in exchange for early admission) or a contested notice of contravention with appeal rights to the CMA.

The proximate regulatory output to watch for is the NESO final report, which is published alongside this notice and which Ofgem's case will track. Beyond the enforcement track, three implications run in parallel:

- RIIO-3 asset-management framework. Ofgem's RIIO-3 transmission methodology is in final-design phase through 2025 and 2026. A North Hyde finding will give Ofgem cover to tighten the condition-reporting and replacement-justification requirements on TOs, and to give greater weight to physical asset condition in the cost assessment. - NGET's RIIO-3 business plan submission (due December 2025). NGET will have to address North Hyde directly in its plan, either as a remediation case or as evidence that its asset-replacement plan was already adequate. - Insurance, Heathrow civil claims, and any inquiry into critical infrastructure resilience sit outside Ofgem's remit but will run in parallel and will share an evidence base with the enforcement case.

If a breach is found, the penalty notice and decision document will become the reference point for what asset-stewardship obligations under B7(1) actually require. That is the lasting value of the case, regardless of the financial number attached.