Utility Week

The Month in Review Brearley Pinchbeck 6 | MAY 2022 | UTILITY WEEK "Come October, that's going to be horrendous. It's got to a stage where I honestly believe the size and scale is beyond what I can deal with and what this industry can deal with." Keith Anderson, Scottish Power on the impact of bill rises on the most vulnerable in society. The Month in Review M ajor announcements on the path to net zero were set out in April with the publication of both the British Energy Security Strategy and decisions on the creation of a Future System Operator (FSO). The former saw the govern- ment commit to immediately set up a new body to help deliver 24GW of nuclear by 2050. The plan also updated 2030 targets for both offshore wind and hydrogen but had little to offer for onshore wind or energy efficiency. For a full analysis of the plan, see p8-10. Meanwhile, the government and Ofgem have confirmed they want to see the FSO established as an independent public corpo- ration by 2024. The Department for Business, Energy & Industrial Strategy (BEIS) and the regulator's joint response to a consultation on the creation of the FSO also sets out the initial responsibilities the body will take on and its principal duties. Two potential ownership models had been considered for the FSO but the response con- Energy security strategy and FSO plans unveiled emergency coordinator roles will stay with National Grid Gas. The consultation floated the potential for a number of other roles for the FSO, including in distribution system operation, heat, transport, hydrogen and carbon capture usage and stor- age. However, these will subject to further consultation. The FSO will have a duty to advise Ofgem and government and will have statutory powers to request information and data from the sector. The response sets out the FSO's primary duty to undertake its functions in a way that pro- motes three main objectives: • Achieving net zero. • Ensuring security of supply of electricity and gas. • Ensuring an efficient, coordinated and economical electricity and gas system. It will also have a statutory duty to consider the need to facilitate competition and inno- vation, whole system impacts and the how consumers are affected by decisions. Tom Grimwood, news editor firms it will be created "in public ownership, in a way which ensures it is truly and properly independent – not only of asset ownership and other commercial energy interests, but also from day-to-day operational control of government". National Grid will be "appropriately compensated" for its divestments. The creation of the FSO will require both primary and secondary legislation, which will be progressed "when parliamen- tary time allows". However, the response stresses the need to set up an FSO as soon as practica- ble and states: "Depending on a number of factors, includ- ing timings of legislation and discussing timelines with key parties, the FSO could be estab- lished by, or in, 2024." As indicated in the consulta- tion launched last July the FSO will first of all be expected to take on all the main existing roles of National Grid Electricity System Operator (ESO) as well as the longer-term planning, forecasting and market strategy functions for gas. However, real- time gas system operation and Nuclear is a big winner from the government's Energy Security Strategy National Grid sells majority stake in gas business for £4.2bn National Grid has agreed to sell a 60% stake in its UK gas transmission and metering arm to Macquarie and British Columbia Investment Man- agement Corporation (BCI) in a deal that values the busi- ness at £9.6 billion. National Grid will receive £2.2 billion on completion as well as a further £2 billion in debt financing. The deal includes an option to sell the remaining 40% of the business still held by National Grid to the con- sortium, which can be exer- cised in the first half of next year. Completion is expected to take place in the second half of 2022. National Grid put the gas business up for sale in March 2021 as part of its "strategic pivot" towards electricity with the acquisition of West- ern Power Distribution. The latest deal means the propor- tion of the company's assets in electricity has grown from c60% to c70%. The gas transmission net- work comprises 8,000km of pipes and 23 compressor sta- tions. The metering business owns 8.4 million domestic and commercial meters. John Pettigrew, chief exec- utive of National Grid, said the consortium had "a long- term commitment to the UK with significant experience in owning and operating infra- structure assets".

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