The energy regulator has fined National Grid 41.6 million pounds for restricting the development of competition in the market for domestic gas meters.
"National Grid has abused its dominance in the domestic gas metering market, restricting competition and harming consumers," Ofgem Chairman John Mogg said in a statement on Monday.
"The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart meters," Mogg added.
Energy network provider National Grid said in a separate statement it was "extremely disappointed" with the decision.
"National Grid has been instrumental in helping Ofgem to develop competition in the UK metering industry, and we strongly believe we have never acted anti-competitively in the development of our contracts," National Grid Chief Executive Steve Holliday said in a statement.
Holliday said the company believed there was no evidence it had harmed consumers, competition or gas suppliers, and it would present its case to the Competition Appeal Tribunal.
Shares in National Grid closed at 762.5 pence on Friday, valuing the company at 19.3 billion pounds.
