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Nolan nobbles National Grid

national gridThere was an unwelcome pause in the services from Xoserve this week, the publicly unheard of business that operates as a key conduit to the smooth running of the gas industry.

Xoserve, borne out of the separation of the old British Gas (now Centrica) and its pipes and networks business (nee Transco) has for 20 years managed the metering, transportation and registration of UK gas supplies.

Purchased by National Grid to form National Grid Transco the back bone of the electricity industry – the transmission system – and the pipes were brought together into one large organisation tasked with ensuring we have gas and electricity ‘on tap’.

The parent business of Xoserve is now National Grid in a joint venture with the other four major gas distribution Network companies (Northern Gas Networks, Scotland Gas Networks, Southern Gas Networks and Wales & West Utilities)

Xoserve undertake a series of crucial activities to the industry, as result then when Xoserve were uncontactable earlier this week the impact was felt almost instantly with inconvenienced customers unable to agree gas contracts in lieu of the provision of critical consumption and usage information.

That temporary hiatus was put down to a glitch in the system, but it was a keen illustration of the important, and largely unseen (unless you count pylons) nature of their work.

It is with interest then to hear that Dermot Nolan, Chief Executive of Ofgem considers that there is a “strong case” for an energy market without National Grid.

Nolan believes it is possible, probably beneficial to create an independent system operator (ISO) to replace National Grid in operating the energy transmission network.

Nolan claimed in another evidence session to the Energy and Climate Change select committee that he and DECC were actively considering the destruction of National Grid to be replaced by an ISO.

In a typically bizarre statement Nolan told the listening MPs that National Grid were not known to have done anything wrong but that still they were guilty by inference and so should be disbanded. Wow. Nolan’s exact words were:

“[There is] no evidence that [National] Grid or any of the transmission companies are engaging in inappropriate behaviour [but an ISO would] remove the appearance of any favouritism.

“The appearance of something is as bad as the actuality of it.”

Errr no it isn’t Dermot.

That isn’t to say that the structure of National Grid couldn’t be improved. Especially as it both operates and owns the networks. An ISO in contrast would simply operate them and have no incentive to increase its asset base for its own benefit as theoretically the National Grid model could.

But again at this point we run into typical Nolan troubled territory. Never one to obfuscate (irony), Nolan said:

“[ISOs are] unencumbered by incentives of saying I own this and want to build this myself”.

Remember though that he also said:

“[There is] no evidence that [National] Grid….. are engaging in inappropriate behaviour”.

So addressing a problem that doesn’t exist? But which might? And besides even if there is no “actuality” there is “appearance” and so an ISO would be better regardless? Got it.

Cue Nolan on ISO’s:

“It is difficult to incentivise such entities”

OK so get rid of something that works, but which could be selfish, of which there is no evidence, just opinion and replace it with something that would be at best have no incentive and potentially be disincentivised to do the job.

Yet Nolan claimed:

“I see a strong case for it”.

Oh dear, small mercies…. at least he’s found another target beyond suppliers and TPIs.