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.”

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.“

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