National Grid 2008 Annual Report Download - page 170

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16714
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.5.1, Doc: 4, Page: 74
Description: EXH 2(B).5.1
0/1553.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/553/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16714
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.5.1, Doc: 4, Page: 74 Description: EXH 2(B).5.1
0/1553.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/553/1*
previous price control arran
g
ements for these businesses ceased on 31 March 2007 and have been replaced by new price
controls covering the period from 1 April 2007 to 31 March 2012. National Grid has accepted Ofgem’s final proposals in respect
of the price controls coverin
g
its role as owner of electricity and
g
as transmission networks. The key elements of these
proposals are a 4.4 per cent. post-tax real rate of return on its regulatory asset value, a £3.8 billion baseline five year capital
expenditure allowance (at 2004/2005 prices) and a £2 billion five year operatin
g
expenditure allowance (at 2004/2005 prices).
Followin
g
its acceptance in principle of the final proposals, National Grid has been workin
g
with Of
g
em to a
g
ree the necessary
amendments to its licences. The amendments to the electricity transmission licence of National Grid Electricity Transmission
plc to enact the price control were implemented from 1 April 2007, while the amendments to the
g
as transporter licence
applicable to National Grid Gas plc’s
g
as transmission business were implemented in part in April 2007, with the remainin
g
elements of the price control expected to be implemented in the second half of 2007 with retrospective effect from 1 April 2007.
National Grid has also accepted Ofgem’s final proposals for the system operator schemes for both
g
as and electricity
transmission:
These proposals have been implemented through licence changes to the relevant licences.
U.S. electricity transmission
In the U.S., consistent with FERC’s transmission pricin
g
policy, National Grid has applied for an increased rate of return on its
investment in transmission assets in New En
g
land. FERC approved this application in October 2006, but has yet to determine
its response to several parties which have sought to appeal this approval.
National Grid has been pursuing a regional planning process with the New York Independent System Operator (“ISO”) to
identify re
g
ional reliability and economic transmission needs. Pro
g
ress has been made and the New York ISO is in the second
year of its reliability plannin
g
process implementation. National Grid has proposed a re
g
ulated transmission solution to reliability
needs identified by the New York ISO. In addition, as part of FERC’s recent open access transmission tariff reform, the New
York ISO is developing a process to address economic planning.
Gas distribution
U.K. gas distribution
Ofgem has extended the current five-year
g
as distribution price controls for a further year throu
g
h extension price control to
cover the year endin
g
on 31 March 2008. The outcome of the formal review was an avera
g
e increase of 11 per cent. in allowed
revenues for 2007/08. In addition, in 2007/08 our revenue allowance will no lon
g
er be dependent on delivery volumes, and our
pricin
g
formula now includes a reduced delivery volume component, a move that will improve stability in our revenues. The next
full price control period will now cover the period from 1 April 2008 to 31 March 2013. Initial proposals were published at the
end of May 2007 and final proposals are expected in December 2007.
Electricity Distribution.
National Grid has reached an a
g
reement for a five year rate plan for its electricity distribution operations in New Hampshire.
This was approved by the New Hampshire Public Utilities
74
(i) covering the external costs of its system operation roles to apply for one year from 1 April 2007; and
(
ii
)
the internal costs of s
y
stem o
p
eration to a
pp
l
y
for the five
y
ears from 1 A
p
ril 2007.