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National Grid creating separate company to operate Britain’s electricity system in 2019

The National Grid is to create a spin-off company that will separately operate its electricity system by April 2019, according to energy regulator Ofgem.

“National Grid should proceed with plans to set up a new legally separate company to carry out its electricity system operator function,” Ofgem said in a statement.

Under the proposal, National Grid would retain ownership of the electricity system operator, but the unit would operate as an autonomous unit.

The new company will require a different licence, staff and offices from other National Grid units, while its board members will not be able to sit on the National Grid’s and its units’ boards, it said.

The plan is designed to help keep household bills down by promoting more competition, coordination and innovation across the system.

Ofgem expects the new company to be fully operational by April 2019.

Its main role will involve balancing the electricity grid on a second-by-second basis and the operator is expected to ultimately work more closely with local electricity distribution network operators to manage electricity flows across the grids.

Dermot Nolan, chief executive of Ofgem, said: “We need a more flexible energy system so that we can make the transition to a lower carbon future. A more flexible system will also ensure customers get the most out of new smart technologies.”

“As the system changes, it’s important that all the monopoly networks adapt. Having a legally separate system operator will allow it to take on a more proactive role in managing the system and working with others, while mitigating any conflicts of interest.”

Ofgem and the energy ministry in January proposed the separation of National Grid’s two main businesses to ensure the group avoids conflicts of interest as both operator and owner of Britain’s power grid.

Ofgem said at the time: “A more independent system operator will help to keep household bills down by working to ensure and enable more competition, coordination and innovation across the system.”

Last month, Lord Forsyth said that the Tory-led “revolution” in the electricity industry brought about by privatisation has led to lower costs and a better service, but claimed that this was now being “undone” and is now virtually nationalised again. 

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