Ofgem has proposed cuts of 13% in National Grid’s transmission charges.
The UK industry regulator Ofgem today proposed that National Grid, the operator of the electricity transmission network in England and Wales revise its target for revenues when the New Electricity Trading Arrangements (NETA) come into effect from March 2001. National Grid had proposed a target of $791 million for the year following the start of NETA. However, the regulator, in a statement on the Regulatory News Service, argued that the costs should equate to $691 million, representing a cut of 13%. The company has until January 10 to respond and it is expected to do so very early in the New Year.
If National Grid is forced to reduce its returns on revenues in the regulated UK transmission market, it will have to consider where it can increase its revenues. It has already adopted an aggressive expansionist policy, with moves into overseas electricity markets and also through its stake in former subsidiary Energis, a telecoms and Internet services provider.
National Grid is already the ninth largest supplier in the US following its acquisitions of Niagra Mohawk and the New England Electric System, but these mergers have yet to be fully integrated and reap the returns expected. Thus another acquisition of an energy company, at least in the short-term, looks unlikely. National Grid is more likely to sit tight and benefit from its Energis stake. It still owns 36% of the fast-growing company, which yesterday bought 75% of the German applications solutions provider, Ision Internet. Energis looks likely to continue to grow strongly in the near future, much to National Grid’s relief.
