It is thought that upon the opening of the market to competition, the National Grid created contracts with five major energy providers which included penalties for those that replaced more than a stipulated number of meters.
Sir John Mogg, the chairman of the regulator, has stated that such a move meant that the company had "abused its dominance" in the sector.
"The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart meters," he added.
Ofgem's decision to fine the National Grid has come after it recently announced it is to investigate the energy supply market amid concern that the sector is not providing good competition for customers.
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