The power and gas transmission giant had condemned Ofgem’s initial proposals, saying the regulator’s view on the company’s financing “does not adequately reflect the risk associated with the investment required”.
Despite little movement by Ofgem from its initial line, Paul Whittaker, National Grid’s director of UK regulation, said this week: “We always said that our focus was on the best possible package. The board has concluded that it gives the business the opportunity to deliver appropriate returns while investing in essential UK infrastructure”
The company’s earlier blast at the regulator’s opening proposals in December 2012 sparked a return volley in which Ofgem chief Alistair Buchanan rapped the company saying: “If they don’t like what we give them, they should go to the Competition Commission.”
Agreement this week brought relief. “The avoidance of a Competition Commission referral should be taken positively as it removes uncertainty for investors,” said Liberum Capital analyst Guillaume Redgwell. “National Grid now has regulatory clarity until 2021.”
Moody’s affirmed the investment grade ratings for NGGT and NGET to reflect “the evolutionary nature of the changes in Ofgem’s new methodology”.
Ofgem’s decision on total capital expenditure for National Grid Electricity Transmission (NGET) was 8 per cent below the company’s business plan proposal and operating expenditure allowance was 15 per cent down. For National Grid Gas Transmission (NGGT) the capital spend allowance was 28 per cent lower than its business plan.
Gas distribution price controls unveiled at the same time pegged total expenditure at National Grid Gas’s four networks some 20 per cent below their business plans.
On issuing the company response, National Grid chief executive Steve Holliday said all final proposals “give our UK businesses their longest ever period of regulatory clarity”.