National Grid 2008 Annual Report Download - page 556

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 60719
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: 38
Description: EXHIBIT 15.1
0/7234.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/234/7*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 60719
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: 38 Description: EXHIBIT 15.1
0/7234.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/234/7*
Table of Contents
46
Transmission continued
National Grid plc
As electricity transmission owner and gas transmission
owner, we own and maintain the physical assets, develop
the networks to accommodate new connections and
disconnections, and manage a programme of asset
replacement and investment to ensure the long-term
reliability of the respective networks.
As electricity system operator and gas system operator, we
undertake a range of activities necessary for the successful,
efficient delivery, in real-time, of secure and reliable energy.
In the case of electricity, this involves the continuous real-
time balancing of supply and demand, and balancing
services that include commercial arrangements with market
participants that enable electricity demand or generation
output to be varied. In the case of
g
as, we ensure the system
is balanced with supply and demand at the end of each day.
We are also required to maintain levels of short-term gas
reserves to ensure domestic and other non-interruptable gas
supplies can be maintained during prolonged cold
conditions.
Transmission US
In the US, we are involved in electricity transmission and our
Transmission US segment has the following principal
activities:
In New England and New York, our transmission business
operates within two independent system operators, one in
New England and one in New York. These non-profit entities
are the system operators for the New En
g
land and New York
networks and are responsible for operating organised
wholesale markets for ener
g
y, for operatin
g
reserves and
capacity, for maintaining the operating reliability of the New
England and New York networks, for coordinating the
activities of the transmission owners, and for managing
transparent transmission expansion planning processes.
We are one of several transmission owners operating within
each of these independent system operators. The
transmission owners are responsible for certain aspects of
the operation of the facilities they each own, such as
maintenance, equipment restoration and switching
operations.
National Grid works closely with the independent system
operators in New England and New York to support efficient
market and network operations and transmission investment.
Electricity
transmission
owner
We own and operate an electricity transmission
network of approximately 13,800 kilometres
spanning upstate New York, Massachusetts,
Rhode Island, New Hampshire and Vermont. Our
US electricity transmission facilities operate at
voltages ranging from 69 kV to 345 kV, utilising
nearly 13,700 kilometres of overhead line, nearly
160 kilometres of underground cable and 501
substations.
We are the largest electricity transmission service
provider in New England and New York by
reference to the length of these high-voltage
transmission lines.
Canadian
interconnector
We own and operate a 224 kilometre direct current
transmission line rated at 450 kV that is a key
section of an interconnector between New England
and Canada.
Regulation
Transmission UK
Through our subsidiary, National Grid Electricity
Transmission plc, we are the sole holder of an electricity
transmission licence for England and Wales. This licence
also covers our role as system operator for the transmission
networks in Great Britain. Under the Electricity Act 1989 we
have a duty to develop and maintain an efficient, coordinated
and economical system of electricity transmission and to
facilitate competition in the supply and generation of
electricity. Under the Energy Act 2004, the holder of a
transmission licence is prohibited from operating an
interconnector and so the elements of the interconnector
assets that we operate were transferred to a new subsidiary
on 14 August 2006, the date at which the relevant part of the
legislation came into force.
Throu
g
h our subsidiary, National Grid Gas plc, we hold a
g
as
transporter licence in respect of the national transmission
system in Great Britain. Under the Gas Act 1986 we have a
duty to develop and maintain an efficient and economical
pipeline system for the conveyance of gas. Our LNG storage
business is managed as a separate business from the gas
transmission business; however, it is regulated under our
gas transporter licence.
Ofgem sets price controls in respect of the amounts that can
be recovered by the owners and operators of electricity and
gas network infrastructure in the UK. These controls are
reviewed every five years and the current price control for
both electricity and gas transmission activities covers the
period 1 April 2007 to 31 March 2012.
The key elements of the current price control for both gas
and electricity transmission are that we earn a 4.4% post-tax
real rate of return on our regulatory asset value, a £4.4 billion
baseline five year capital expenditure allowance and a
£1.2 billion five year operating expenditure allowance.
The charges that we can make for access to our UK
electricity and gas transmission systems are determined by
formulae linked to the UK retail price index (RPI). These
formulae are based upon Ofgem’s estimates of operating
expenditure, capital expenditure and asset replacement,
together with an allowed rate of return. In addition, we are
subject to a number of incentives that can adjust our
transmission network revenue.