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UK energy minister questions future of National Grid

UK energy minister Kwasi Kwarteng has questioned whether National Grid should retain its flagship role operating the country’s electricity system following a power cut last month that disrupted more than 1m homes and businesses in England and Wales.

Mr Kwarteng, who assumed his role after Boris Johnson became prime minister in July and visited National Grid’s control centre following the blackout, told the Financial Times: “Frankly I think there is a question about the ESO [electricity system operator] and its role within the National Grid.”

National Grid, which was privatised in 1990, has seen off previous demands that it should be broken up but calls for a rethink have intensified following the outage last month that caused widespread rail disruption, particularly in and around London, and also affected a hospital in Ipswich and Newcastle airport.

The opposition Labour party intensified its demands for National Grid to be renationalised after the power cut but more moderate voices, such as Oxford university professor Dieter Helm, who authored a 2017 report on energy for the government, have also said the job of managing the system should be transferred to a publicly owned body.

The FTSE 100 company avoided a break-up in 2017 when Ofgem, the energy regulator, ruled it should be allowed to keep the electricity system operator role but it should be hived off into a legally separate business. However, it remains within the wider National Grid group.

Mr Kwarteng said he not believe the Ofgem decision was “envisaged as a permanent solution to this question”.

“I think it was seen as perhaps a staging post to another iteration where the two entities might be separate,” Mr Kwarteng said.

“As you know they were very much as one body and then we’ve had this separation within the same institution and people are saying now that there may well be the case that the ESO . . . should be separate. And again, this is a question that we’re looking at.”

National Grid both owns energy infrastructure in the UK and has overall responsibility for balancing electricity supply and demand, which critics say presents a conflict of interest. It has also been developing interconnectors — subsea cables that allow electricity to be traded with countries such as Belgium, France and the Netherlands, which compete with domestic power generators.

Analysts have privately suggested stripping National Grid of the electricity system operator role and creating a public body responsible for keeping Britain’s lights on would be an easy way for the Conservative party to counter Labour’s renationalisation agenda. 

Prof Helm suggested such a move would not only be in the public interest but “arguably also in National Grid’s interests”. 

He said the system operator role was a very small part of National Grid’s overall business, which also includes owning energy networks in the US. However the recent power cut had caused the company reputation damage, even though it has argued the events of August 9 were “extremely rare and unexpected”.

“There is little upside to its shareholders from owning the SO [system operator], and lots of risk, especially reputationally, as the recent power cut has revealed,” Prof Helm wrote in a recent blog.

The government and Ofgem are both investigating the power cut. National Grid has also been conducting its own internal inquiry, the final results of which were presented to Ofgem on Friday and will be published by the regulator on Tuesday.

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