Break up National Grid to prevent conflict of interest, MPs say

New independent “system operators” should be set up to manage supply and demand on Britain’s national gas and electricity networks, the committee said in a report.

National Grid gets regulated income for owning and maintaining the electricity transmission network in England and the gas distribution network across the UK, reports The Telegraph.

As system operator, the company also has formal responsibility – as well as an influential position – to advise on the level of new network investment needed.

“National Grid could advocate more capacity than necessary in order to be allowed to build, then own, such assets,” the report warns.

It said there was also a potential conflict of interest in National Grid’s non-regulated business developing interconnector cables to import power from abroad, since as system operator it was in a position to call on interconnectors – or other options – to help keep the lights on.

As a result, the MPs advocate the creation of an independent system operator. “Despite strong efforts by National Grid itself and Ofgem to mitigate the potential for conflicts of interest, it seems intractable and growing,” they said.

Angus Brendan MacNeil MP, the committee chairman, said: “National Grid’s technical expertise in operating the national energy system must be weighed against its potential conflicts of interest. The Independent System Operator model has worked in the USA. It is time for it to be brought to these shores.”

Amber Rudd, the energy secretary, hinted at a possible breakup of National Grid last year when she said there was a “strong case for greater independence for the system operator”, a position that was reiterated by the Department of Energy and Climate Change (DECC) in response to the MPs’ report.

However, the National Infrastructure Commission, which was tasked with looking at the issue, concluded that despite “the potential for a conflict of interest” it found “no evidence” that Grid had acted to the detriment of consumers.

It warned that “fundamental change in the immediate term risks delaying action over the more important task of making our networks better run and more efficient” and recommended that “the creation of an entirely independent System Operator should not be treated as an immediate priority but should be kept under review”.

A spokesman for National Grid said:  “We take very seriously the need to provide confidence that any potential conflicts of interest are handled correctly and have a lot of experience operating in an environment where this is a key part of what we do.

“We are currently working with the Government and with regulators to ensure we continue to manage potential conflicts as our role develops.

“There is little evidence that an Independent System Operator model would provide any benefits that would justify the cost to households, potential disruption to much of the energy sector, and the risks to security of supply such uncertainty could create.”

A spokesman for the DECC said: “We are working alongside National Grid and Ofgem to see how we can ensure our electricity system is as secure, flexible and independent as possible, whilst operating in the best interest of consumers.”

The MPs’ report also suggested that regional system operators may also need to be set up to balance supply and demand on distribution networks as increasing amounts of local-level power generation ate added to the system.

Currently the companies that own distribution networks have a “blind, passive role” when it comes to managing their operation, but should in future use smart grid technologies to take “responsibility for balancing energy flows” on their grids, the report said.