The UK will set up an independent electricity system operator within the larger National Grid Group to avoid any potential or perceived conflicts of interest and to adapt to the changing electricity system, the UK government, energy regulator Ofgem and National Grid said in joint statement Thursday.
"The government has been considering the case for a more independent electricity system operator, working with Ofgem and National Grid," the Department for Business, Energy & Industrial Strategy said.
"All three parties have concluded that a more independent system operator can realize benefits for consumers by enabling a more secure, competitive and flexible system," BEIS said.
Ofgem said the new system operator will be well placed to both respond to and facilitate the transformation of the electricity system, and the greater level of independence will help the industry be more confident in its impartiality.
The formation of a legally separate entity within National Grid and wholly owned by it means that the company will avoid being broken up.
This news was "slightly positive," RBC analysts said in a research report Thursday as the "earnings and asset base relating to the system operator role will remain with National Grid and contribute towards its bottom line." Ofgem has further set out clear expectations for the proposed new system operator. The regulator said the new entity should act as a residual balancer, support effective competition in the market, facilitate a whole-system view and boost competition in networks.
Also on Thursday, the energy regulator launched a consultation seeking views on these proposals and the approach for implementing any changes. The deadline for the consultation is March 10, 2017.
