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National Grid Electricity Transmission Annual Report and Accounts 2006/07 1
Operating and Financial Review
This Operating and Financial Review describes the main trends
and factors underlying our development, performance and
position during the year ended 31 March 2007 as well as those
likely to affect our future development, performance and
position. It has been prepared in line with the guidance provided
in the Reporting Statement on the Operating and Financial
Review issued by the UK Accounting Standards Board in
January 2006.
Content of Operating and Financial Review
1 About National Grid Electricity Transmission
3 Current and future developments
4 Objectives and strategy
8 Principal risk and uncertainties
11 Key performance indicators
13 Performance during the year
20 Electricity Transmission
23 Non-regulated Businesses and corporate activities
23 Discontinued operations
24 Financial position and financial management
28 Accounting policies
About National Grid
Electricity Transmission
Principal operations
We are a part of the National Grid group of businesses. Our
principal operations are the ownership and operation of
regulated electricity transmission networks in the UK.
History
National Grid Electricity Transmission originated from the
restructuring of the UK electricity industry in 1990. In 2005, we
adopted National Grid as a single name for all our principal
businesses.
Key milestones
1990 Electricity transmission network in England and Wales
transferred to National Grid Company on electricity
privatisation
1995 National Grid listed on the London Stock Exchange
2002 Merger of National Grid Group and Lattice Group to form
National Grid Transco
2005 National Grid adopted as the group brand name, with
National Grid Company renamed National Grid Electricity
Transmission
2006 Disposal of interconnector business
Businesses and segments
The performances of our businesses are reported by segment,
reflecting the management responsibilities and economic
characteristics of each activity. Our principal businesses and
segments are as follows:
Business Segment Description of principal activities
Electricity
Transmission
Electricity
Transmission
Owner and operator of the high-
voltage electricity transmission
network in England and Wales.
Operator of the electricity
transmission networks in Scotland.
Non-regulated
Businesses
Corporate
activities
Other activities Our other activities comprise non-
regulated contracting activities and
corporate activities.
All of our businesses and activities are undertaken within Great
Britain.
External market environment
The principal market in which we operate is the electricity
market in the UK.
The generation and supply of electricity in the UK is competitive
in that consumers can contract with different suppliers to obtain
the electricity they need. Those suppliers are then responsible
for sourcing that electricity from electricity generators or
importers as appropriate, as well as arranging for that electricity
to be delivered through physical delivery networks.
These networks, including the ones we operate, are monopolies
in their local areas as, for the majority of consumers, there are
no alternative methods of receiving electricity.
Electricity delivery
Electricity is transported through transmission networks to
regional electricity networks that then deliver that electricity to
consumers on behalf of suppliers. Certain end customers,
primarily large industrial users, receive electricity direct from the
transmission network.
We are the owner and operator of the electricity transmission
network in England and Wales and operator (but not owner) of
the two electricity transmission networks in Scotland.
The other principal infrastructure owners and operators in the
UK are Scottish & Southern, Scottish Power, E.on, EDF, and
MidAmerican Energy, each of which own two electricity
distribution networks, and United Utilities and Western Power
Distribution, both of which own one electricity distribution
network. Scottish & Southern and Scottish Power also each
own an electricity transmission network in Scotland, which we
operate in each case. Viridian is responsible for the
transmission and distribution of electricity in Northern Ireland.