National Grid 2008 Annual Report Download - page 522

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 8914
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 10
Description: EXHIBIT 15.1
0/4206.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/206/4*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 8914
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 10 Description: EXHIBIT 15.1
0/4206.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/206/4*
Table of Contents
18
About National Grid continued
National Grid
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External market and regulatory environment
Global utility sector
The global utility sector is expanding, driven by the
development of new sources of energy and the requirement
to replace existing plant and infrastructure which are nearing
the end of their useful lives. Over the next 25 years there is
expected to be $14 trillion (£7 trillion) of utility investment
globally, of which $8 trillion (£4 trillion) is expected to be in
electricity and gas transmission and distribution
infrastructure. Although a substantial portion of this
investment will be required in the developing world,
significant investment is needed in the electricity and gas
transmission and distribution infrastructure in developed
economies such as the UK and the US.
Markets in which we operate
The principal markets in which we operate are the electricity
and gas markets in the UK and the northeastern US.
The generation and supply of electricity and gas in the UK
and in most states in the northeastern US are competitive in
that consumers can contract with different suppliers to obtain
the energy they need. Those suppliers are then responsible
for sourcing that energy from electricity generators or from
gas extractors or importers as appropriate, as well as
arranging for that energy to be delivered through physical
delivery networks. These networks, including the ones we
operate, are generally monopolies in their local areas as, for
the majority of consumers, there are no alternative methods
of receiving electricity or gas.
Energy delivery in the UK
In the UK, domestic and commercial consumers contract
directly with energy suppliers who obtain the energy required
from electricity generators and gas extractors or importers.
In general, energy is transported through electricity or gas
transmission networks to regional electricity or gas
distribution networks that then deliver energy to consumers
on behalf of suppliers. Certain end customers, primarily large
industrial users, receive electricity or gas direct from the
relevant transmission network.
We are the owner and operator of the high-voltage electricity
transmission network in England and Wales, operator (but
not owner) of the two electricity transmission networks in
Scotland and owner and operator of the gas national
transmission system and of four of the eight regional gas
distribution networks in Great Britain. We charge energy
suppliers, electricity generators and gas shippers for our
services, which they then incorporate into the prices charged
to end consumers.
The other principal infrastructure owners and operators in
the UK are Scottish & Southern, Iberdrola, E.ON, EDF, and
MidAmerican Energy, each of which own two electricity
distribution networks, and North West Electricity Networks
and Western Power Distribution, both of which own one
electricity distribution network. Scottish & Southern and
Iberdrola also each own an electricity transmission network
in Scotland, which we operate in both cases. The gas
distribution networks in Scotland and southern England are
owned by Scotia Gas Networks, in the north of England by
Northern Gas Networks and in Wales and the west of
England by Wales & West Utilities. Viridian is responsible for
the transmission and distribution of electricity in Northern
Ireland.
Energy delivery in the northeastern US
In most states in the northeastern US, consumers are able to
purchase their energy through independent energy suppliers,
but the majority of consumers still purchase electricity or gas
from their local electricity or gas distribution network
business. The major alternative fuel source is oil, which is
used by many consumers for domestic heating purposes.
Electricity is transported either direct from generators into
local electricity distribution networks or via electricity
transmission networks, while gas is obtained from import
terminals or inter-state pipelines and then transported
through local gas distribution networks. Certain end
customers, primarily large industrial users, receive electricity
or gas direct from the electricity transmission networks or
inter-state gas transmission pipelines.
Our US electricity and gas distribution businesses support
regulatory policies that encourage customers to purchase
their energy from independent suppliers. Where this occurs,
we deliver that ener
g
y to consumers on behalf of those
suppliers. For the majority of consumers in our operating
areas who continue to purchase their energy from us, we
source energy from electricity generators or gas suppliers on
behalf of our customers in accordance with regulatory
approved arrangements. We are generally responsible for
billing customers both for our delivery services and for
electricity and gas consumed (on which we do not charge
any additional margin).
On Long Island, we operate the electricity transmission and
distribution network on behalf of its owner, the Long Island
Power Authority. We have also sold the capacity of our Long
Island generating plants to the Long Island Power Authority.