By Muvija M and William James

LONDON (Reuters) -A fire that shut London's Heathrow airport in March, stranding thousands of people, was caused by the UK power grid's failure to maintain an electricity substation, an official report said on Wednesday, prompting the energy watchdog to open a probe.

The closure of Heathrow, Europe's busiest airport, cost airlines tens of millions of pounds. It also raised questions about the resilience of Britain's infrastructure.

Energy minister Ed Miliband called the report "deeply concerning," after it concluded that the issue which caused the fire was identified seven years ago but went unaddressed by power grid operator National Grid. Energy regulator Ofgem said it was "a preventable, technical fault".

The report follows a review of the March 21 incident by the National Energy System Operator, which manages the electricity network and was separated from National Grid last year.

As a result of the report, Ofgem launched an enforcement investigation into National Grid Electricity Transmission (NGET), which owns and maintains the high-voltage electricity transmission network in England and Wales.

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The report said a "catastrophic failure" on one of the transformer's high voltage bushings at NGET's 275 kilovolt substation caused the transformer to catch fire, most likely due to moisture entering the bushing, sparking an electrical fault.

Despite detecting an elevated moisture reading in one of the bushings in 2018, which indicates an imminent fault that requires the component to be replaced, the company did not fix the issue, the report said.

The controls in place were not effective and failed to identify that no action had been taken, including during an opportunity in 2022 when NGET decided to defer basic maintenance, letting the issue go unaddressed, it added.

A National Grid spokesperson said that the company had a comprehensive asset inspection and maintenance programme in place and that it had taken further action since the fire.

"There are important lessons to be learnt about cross-sector resilience and the need for increased coordination," the spokesperson said.

Ofgem plans to review whether National Grid complied with the relevant legislation and licence conditions relating to the development and maintenance of its electricity system close to Heathrow.

The regulator will also commission an independent audit into National Grid assets to review whether the failings were a one-off or systemic, it said.

In an emailed response to the report, Heathrow blamed the incident on a "combination of outdated regulation, inadequate safety mechanisms, and National Grid’s failure to maintain its infrastructure".

Its own review found in May that the airport had responded well to the power outage, saying alternative choices would not have materially changed the outcome on the day.

(Reporting by William James. Editing by Muvija M, Alison Williams and Mark Potter)