27th Jan 2005 09:00
Dept Trade & Industry27 January 2005 Reference P/2005/29 Date 27 January 2005 GOVERNMENT GO AHEAD FOR GAS DISTRIBUTION NETWORK SALES The Government has decided to consent to the sale by National Grid Transco (NGT)of four of its eight gas distribution networks, paving the way for consumersavings worth an estimated £225million NPV over 18 years from 2005. Thisfollows the Authority's decision to approve the sales under the same statutoryduties. The decision by Trade and Industry Secretary Patricia Hewitt comes almost twoyears after NGT announced its intention to sell between one and four of itsDistribution Networks. Since this announcement, Ofgem has been leading a majorexercise to determine the potential benefits of such a sale. The DTI has beenworking closely with Ofgem and the Health and Safety Executive has been workingon the safety aspects. The sale would bring the structure of the gas industry more in line with theelectricity sector, allowing Ofgem to perform "comparative regulation" whencomparing the performance of different Distribution Networks in setting pricecontrols. Ofgem estimates that this increased competition is likely to generatesome £225m worth of net savings for consumers over 18 years. Notes to Editors 1. The regulatory consents that the DTI has provided are under NGT's GasTransporter licence and under the Gas Act, as amended - concerning the disposalof a DN asset and the transfer of part of NGT's licence to another entity. 2. The primary statutory duty shared by the SoS and GEMA is one ofprotecting the interests of consumers in relation to gas conveyed through pipes,wherever appropriate by promoting effective competition. 3. Comparative regulation - This is the competitive impact of the saleand driven by the improved information that will be available to Ofgem to setthe price controls for each DN and for NGT. It will allow Ofgem to compare theperformance of independently owned distribution networks, and thereby tobench-mark the level of costs associated with the most efficient network.Comparative regulation is used in the UK in both the water and electricityindustries. There is a body of evidence which shows that this "comparative"regulation can result in significant additional cost savings compared to theregulation of individual companies. 4. The gas pipeline system broadly consists of the long-distance, highpressure National Transmission System (NTS) and this feeds into 8 DistributionNetworks (DNs), which are local pipeline systems. Currently National GridTransco (NGT) owns and operates both. 5. NGT announced on 31 August 2004 that it has agreed to sell four ofits DNs, subject to regulatory approval as follows: • North of England DN; • Wales and the West DN; • South of England DN; and • Scotland DNs; 6. The Authority - Gas and Electricity Markets Authority (GEMA) - headsthe Office for Gas and Electricity Markets (OFGEM) 7.NPV: Net Present Value is today's value of future benefits less future costs.Actual consumer benefits are not expected to accrue until 2008. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
National Grid