National Grid plc hits back at report which recommends re-nationalisation

National Grid, the FTSE-listed company that operates Britain’s national electricity system, has defended itself against calls for renationalisation amid continuing corporate turmoil in the UK energy supply market.

Debate around the renationalisation of energy grids resurfaced this year after the idea was included in Labour’s general election manifesto, with the party claiming that families would save £220 a year if both the energy and water industries were returned to the state.

Dieter Helm, an Oxford university professor who was commissioned by the government to research the costs of energy in Britain, also proposed that National Grid’s role of managing the energy system should be returned to the public sector.

But National Grid has now defended its role, claiming that the costs of maintaining the high voltage transmission network are now 30% lower than before privatisation in 1990.

OFGEM the regulator, said that network costs fell by 45% in the 15 years after privatisation. But this was followed by a planned price rise in the 10 years to 2015 to fund network upgrades.

Overall networks costs have fallen by 17%, according to the regulator. The group’s boss John Pettigrew said he was “not surprised” by the recommendation within a recent report on energy costs.

“But we agree to disagree,” he said. “When we look at the benefits that have been driven through to customers since privatisation – well, our analysis doesn’t support that.”

See also:  National Grid plc functions should be re-nationalised

Meanwhile, the GMB trade union for the energy industry, has called on the government to urgently implement many of the recommendations of Dieter Helm’s ‘Cost of Energy Review’ – in particular those regarding government’s role in the energy market and the downgrading of OFGEM.

The recommendations to downgrade OFGEM and for the government to establish independent national and regional systems operators would allow OFGEM and its £90m annual budget to return to its former ‘littleness,’ significantly reducing the regulatory burden and its costs.

GMB again warns that the combination of uncertainty caused by lack of clarity and delays in implementing a price cap, plus the risks of getting the balance wrong, could lead to thousands of short-sighted job cuts in the energy sector as firms enter a race to the bottom in the energy supply market to protect profits.

The announcement from SSE and Npower-Innogy that they plan to merge suggests less competition in the energy sector not more, as companies adjust to the pressures of a price cap and the Big Six become the Big Five.

Justin Bowden, GMB National Secretary for Energy said: “By explicitly recognising that Government is now responsible for all key decisions in the energy sector, and that all the players are in effect contractors, the Helm Report has shone a spotlight on the huge inadequacies in energy generation and supply

“Hesitation by Government to face up to these massive structural issues, of which price capping is just a part, have spawned merger efforts by two of the Big Six suppliers already as they rush to protect profits no doubt by trying to shed thousands of good, UK jobs.

“As Helm exposes, competition in the Sector is in fact a mirage and radical overhaul is required if the fleecing of consumers is to stop and damage to vital infrastructure through thousands of short-sighted job losses at SSE, NPower and across the energy sector are to be avoided.

13 Nov 2017

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