Energy watchdog and Government propose changes to National Grid operations

ENERGY watchdog Ofgem and the UK Government have announced plans to evolve the role of Midlands utility National Grid.

The two bodies want to create a greater separation between the system operator role performed by National Grid and the rest of the National Grid group.

They believe a more independent system operator will help to keep household bills down by improving competition and innovation.

The system operator role includes balancing the electricity grid second by second. In future as the electricity system becomes more flexible this role will need to evolve. The system operator will also have to work more closely with local electricity distribution network operators to manage electricity flows across the grids.

To this end, Ofgem has published a consultation for a legally separate electricity system operator to be established within National Grid.

Dermot Nolan, chief executive of Ofgem, said: “We need a more flexible energy system so that we can make the transition to a lower carbon future. A more flexible system will also ensure customers get the most out of new smart technologies.  

“As the system changes, it’s important that all the monopoly networks adapt. Having a legally separate system operator will allow it to take on a more proactive role in managing the system and working with others, while mitigating any conflicts of interest.”

Greg Clark, the Business and Energy Secretary, said: “Separating our system operator will give greater confidence to investors that Great Britain offers a level playing field for companies wanting to be part of our clean, secure and flexible energy system – keeping costs as low as possible for our homes and businesses.”

It is proposed that the more independent system operator will have distinct employees, directors and offices from other National Grid electricity subsidiary companies.

National Grid said it welcomed the notion that a more independent electricity system operator, within National Grid, could help realise benefits for consumers.

It said that under proposals, which are subject to consultation, the electricity system operator will be incorporated into a separate company, wholly owned by National Grid, with its own board by April 2019.

The system operator will carry out its existing functions as well as taking on new responsibilities, including the promotion of smart solutions.
 
National Grid CEO John Pettigrew said: “We believe National Grid is best placed to deliver the role of system operator, especially during a time when the energy landscape is changing rapidly. The Government and Ofgem have recognised our vast experience and expertise in balancing the electricity system and ensuring the market runs efficiently.
 
“We share the same priorities towards keeping customer bills down, increasing certainty, enabling greener energy, and security of supply. We will be working closely with key stakeholders to achieve these objectives while further evolving the independence of the system operator role within National Grid.”