National Grid History

Who they are, what they do and how they’re central to the energy market

Put simply, National Grid is the owner of the majority of pipes and wires that transport electricity and gas around the UK from the power generators and gas terminals to the customer meter. In reality National Grid’s history is a lot more complex than that having gone through a host of different guises and constructs over the years. In effect National Grid, or rather its predecessors have spawned the entire market we have today. Almost every modern day player has been spawned by or emerged from activities at one time undertaken by the National Grid. In this guide we illustrate their central role in the UK energy markets and provide a brief account of all the current market players including the Big 6 energy suppliers. In the pre-privatisation era the energy companies were state controlled monopolies. Often referred to as the ‘gas and electricity boards’ rather than their official names. Although characteristics varied, these national and regional organisations were large in size and scope with one organisation potentially ‘owning’ the infrastructure of the pipelines, wires, pylons and substations as well as laying cables and pipes, producing gas and generating electricity, supplying customers, selling appliances and collecting payments. Here’s the full story of how that structure evolved so as to become the market we see today.

The Area Electricity Boards

In England and Wales 12 Area Electricity Boards (AEBs) were formed under the 1947 Electricity Act and were granted the responsibility for the distribution and supply of electricity to consumers. These Boards were:

• The East Midlands Electricity Board (EMEB)
• The Eastern Electricity Board (EEB)
• The London Electricity Board (LEB)
• The Merseyside and North Wales Electricity Board (MANWEB)
• The Midlands Electricity Board (MEB)
• The North Eastern Electricity Board (NEEB)
• The North West Electricity Board (NWEB)
• The South Eastern Electricity Board (SEEB)
• The South Wales Electricity Board (SWALEC)
• The South Western Electricity Board (SWEB)
• The Southern Electricity Board
• The Yorkshire Electricity Board (YELB)

The CEGB

As part of the centralised control structure implemented in the 1947 Act, in order to support the 12 AEBs the Central Electricity Generating Board (CEGB) was established in 1957 with responsibility for electricity generation in England and Wales.

The birth of National Grid

The CEGB controlled a National and numerous other District control rooms across England to anticipate demand and generation supply. This was the first incarnation of what is now the National Grid. The CEGB also operated significant research and development operations to maintain the technological progress of the industry.

The Scottish Solution

For Scotland the structure formed was even more integrated with all aspects of generation, transmission, distribution and supply being carried out by two vertically integrated companies:

• The South of Scotland Electricity Board and
• The North of Scotland Hydro-Electric Board.

The Area Gas Boards (AGBs)

Meanwhile, under the 1948 Gas Act 12 Area Gas Boards (AGBs) were formed from over 1,000 privately owned gas companies. These new boards were responsible for the development and maintenance of the gas supply to the UK. The boards themselves covered the following regional boundaries:

• The Scottish Gas Board
• The Northern Gas Board
• The North Western Gas Board
• The North Eastern Gas Board
• The Wales Gas Board
• The West Midlands Gas Board
• The East Midlands Gas Board
• The South Western Gas Board
• The North Thames Gas Board
• The Eastern Gas Board
• The Southern Gas Board
• The South Eastern Gas Board

These were broadly similar to the electricity market yet with some important regional distinctions. Unlike in the electricity market, the Scottish Gas Board mirrored the structure of the AGBs in England and Wales.

• Foreign ownership beckons – In 1995 the remaining 40% of PowerGen plc and National Power plc was placed up for sale by the government and was acquired by private investors. This triggered a series of mergers and acquisitions in the UK energy industry:
• 1994 – In 1994, British Gas plc and more specifically the Gas Business in Great Britain underwent restructuring to produce five new business units:
  • Transco, responsible for the transportation and storage of gas
  • Public gas supply, the domestic business
  • Business gas supply, the non-domestic business
  • Service, the ‘gas man’
  • Retail, the high street shops
• The age of privatisation – In 1991 60% of PowerGen plc and National Power plc was sold off to private investors. This action triggered the creation and ownership structure of the market we have today. Changes of ownership have been frequent, refocusing of businesses common and increased foreign ownership a feature, creating an industry framework that is a far cry from that foreseen by the 1947 Electricity Act.
• Nuclear Electric – Also in 1991 in the final act of the break up of the CEGB, a new company was formed, Nuclear Electric, which acquired the CEGB’s nuclear generation assets. An England and Wales version of Scottish Nuclear
• The birth of Scottish Power – In 1991 the remainder of the assets of the South of Scotland Electricity Board and the North of Scotland Electricity plc were privatised becoming respectively:
  • Scottish Power plc and
  • Scottish Hydro-Electric plc
• British Gas plc reorganises – In 1990, British Gas plc was restructured into three core groupings:
  • The Gas Business in Great Britain
  • Exploration and Production
  • Global Gas
• National Grid changes hands – In 1990 as part of the break up of the CEGB, the operations and assets of the National Grid were then distributed to each of the RECs prior to their privatisation.
• The rise of the plc – Later in 1990, these RECs were privatised becoming:
  • East Midlands Electricity plc
  • Eastern Electricity plc
  • London Electricity plc
  • MANWEB plc
  • Midlands Electricity plc
  • Northern Electric plc
  • Norweb plc
  • SEEBOARD plc
  • SWALEC plc
  • SWEB energy plc
  • Southern Electric plc
  • Yorkshire Electricity Group plc
  • Scottish Power plc
  • Scottish Hydro-Electric plc
• The PESs & RECs – Meanwhile, as part of the break up of the CEGB, in 1990, in readiness for privatisation 14 companies, the Public Electricity Suppliers (PES), were created. Otherwise known as Regional Electricity Companies (REC). These companies consisted of the 12 AEBs and the 2 hitherto unique Scottish operators.
• Scottish Nuclear – And in 1990 the South of Scotland Electricity Board vested its nuclear generation interests into a newly formed entity, Scottish Nuclear.
• Scottish Hydro-Electric plc – Separately in 1989 the North of Scotland Hydro-Electric Board, the vertically integrated company, became North of Scotland Electricity plc in readiness for its own privatisation.
• The pre 70’s era – These state controlled entities continued to function over the subsequent 25 years into the early 1970s with little change in structure, however by then the arrangements were in need of overhaul to meet the needs of the contemporary era and the unique demands of the increasingly industrialised 1970s.
• British Gas Corporation – In response to the changes, the 1972 Gas Act implemented a restructuring of the UK gas industry with the 12 AGBs being merged into one single entity the British Gas Corporation.
• The nationalisation era – As a result of their prolonged existence and lack of commercial competition the British Gas Corporation and the AEBs had become huge and unwieldy and didn’t match the burgeoning ambitions for the private sector under the Thatcherite market revolution. Privatisation beckoned.
• British Gas Plc – In 1986, the assets of the regionalised gas companies including the British Gas supply business were transferred from the state owned British Gas Corporation into what became known as British Gas plc.
• Gas Privatisation – Later that same year, the infamous “If you see Sid, tell him” campaign encouraged thousands of the public to invest in British Gas plc heralding its new era as a publicly traded company working to reward its shareholders and not government or state objectives.
• The electricity conundrum – The relative simplicity of the privatisation of British Gas plc was not to be matched in the electricity market with a series of disparate state owned businesses and structures performing similar functions to that of the all enveloping British Gas plc. As a result the process to privatisation was significantly more complex and involved.
• The birth of PowerGen (E.ON) – In the first instance, commencing in 1989 the CEGB was separated into four bodies:
  • PowerGen (1989)
  • National Power (1989)
  • National Grid (1990)
  • Nuclear Electricity (1991)
  • The first of these PowerGen plc, was a 100% government owned entity that was created in order to be primed for privatisation. The business was endowed with 48% of the overall UK generation capacity.
  • The birth of nPower (RWE) – Also as part of the 1989 separation of the CEGB, the 100% state owned National Power business was established holding 52% of the UK’s generation capacity. Again this structure was designed to facilitate an attractive proposition for the burgeoning appetite for private ownership.
• In 1995 – MANWEB plc was acquired by Scottish Power. Eastern Electricity plc was acquired by Hanson plc. Norweb plc merged with Northwest Water to form United Utilities. SWEB Energy plc was acquired by US utility Southern Company. By 1995, National Grid itself was listed on the stock exchange and private investors began to take ownership of the business alongside the regional, now privatised, electricity and gas companies. Also in 1995 the Scottish Nuclear and Nuclear Electric businesses were merged.
• 1996 – In 1996 US business Entergy acquired London Electricity plc. US Corporation CalEnergy acquired Northern Electric plc and formed the CE Electric subsidiary. Welsh Water acquired SWALEC and rebranded itself as Hyder. Advanced nuclear plants in the combined Scottish Nuclear and Nuclear Electric business were transferred into a new company named British Energy. Meanwhile, the older Magnox reactor assets were spun out into a company called Magnox Electric.
• 1997 – In 1997 American Electric Power (AEP) acquired Yorkshire Electricity Group plc. and the Eastern Electricity plc was demerged from Hanson plc and became The Energy Group plc.
• The birth of British Gas and Centrica – In 1997 a demerger was enacted within British Gas plc with two separate listed companies being created: BG plc and Centrica plc
  • BG plc took ownership of:
    • Transco (the transmission and distribution business)
    • Exploration and Production
    • International downstream
    • Research & Technology
    • The property portfolio
  • Centrica plc took ownership of:
    • British Gas sales including Public gas supply, the domestic business and Business gas supply, the non-domestic business
    • Gas trading
    • Service, the ‘gas man’
    • Retail, the high street shops
• The birth of EDF Energy – In 1998 EDF International the French state energy supplier acquired London Electricity plc from Entergy.
• The birth of SSE – In 1998 Scottish Hydro-Electric plc merged with Southern Electric plc and became known as Scottish and Southern Energy plc.
• 1998 – In 1998 The Energy Group plc was acquired by TXU Europe and became TXI Energi. National Power acquired Midlands Electricity plc and rebranded itself as nPower. Powergen acquired East Midlands Electricity plc. The assets of Magnox Electric were merged with those of British Nuclear Fuels (BNFL)
• 1999 – In 1999 Western Power Distribution, the US based utilities business, acquired SWEB Energy plc and its parent business Southern Company. WPD separated the business into the SWEB supply arm and the WPD distribution business. A fresh set of restructuring took place with BG plc becoming the BG Group operating the subsidiaries:
  • BG Energy Holdings Ltd
  • BG Transco plc
• Regulation & Separation – In 2000, the Utilities Act came into effect and the Regional Electricity Companies were required to separate their businesses into two streams with dedicated licences and management teams. These streams were to be their supply business and their Distribution Network Operator businesses (DNOs) operating independently of one another and required to provide third party services to other supplier businesses.
• 2000 – In 2000 TXU Energy acquired the Norweb plc supply business and rebranded it as Norweb Energi. Western Power Distribution (WPD) acquired Hyder and retained its DNO business, rebranding it Infralec shortly before reverting to the WPD moniker. SSE acquired the gas and electricity supply arms of Hyder, the former SWALEC energy supply business to leave it owning:
  • SWALEC,
  • Southern Electric,
  • Scottish Hydro Electric,
  • Southern Electric Power Distribution, (now known as SSE Power Distribution)
  • Scottish Hydro Power Distribution, (now known as SSE Power Distribution) and
  • Scottish Hydro Electric Transmission.
• In 2000 the nPower business underwent a restructure, demerging into:
  • Innogy, focusing on the UK based business, and
  • International Power focused on generation and overseas opportunities.
• In 2000 BG Plc underwent a further demerger separating into:
  • BG Group Plc (the international elements of the gas business) and
  • Lattice Group Plc.

By this point BG Transco plc was owned by Lattice Group plc and the wider Lattice Group organization was focused on UK gas transmission and distribution. The 12 AGBs of 1948 had come a long way.

• 2001 – In 2001 Innogy acquired Yorkshire Electricity Group plc from AEP. Northern Electric plc supply business was transferred to Innogy in return for CE Electric taking ownership of the Yorkshire Electricity DNO. Innogy therefore acquired both the Yorkshire and Northern electricity supply businesses and CE Electric both the Yorkshire and Northern DNOs. The CE Electric businesses were rebranded as Northern Electric Distribution Limited (NEDL) and Yorkshire Electricity Distribution Ltd (YEDL) under the CE Electric UK umbrella. Also in 2001 the Norweb DNO business was rebranded to United Utilities Electricity.
• 2002 – In 2002 E.ON the German owned energy utility acquired PowerGen plc rebranding it as E.ON. Innogy was acquired by RWE and renamed RWE nPower plc. Powergen acquired TXI Energy’s supply business whilst their Eastern DNO business was sold to EDF Energy. National Grid plc and Lattice Group plc merged and formed a new company: National Grid Transco plc. This merger united the UK gas and high voltage electricity transmission businesses and the UK Gas distribution business for the first time in the UK energy market’s history.
• 2003 – In 2003 EDF Energy acquired the SWEB supply business from WPD.
• 2004 – In 2004 E.ON acquired the DNO business of Midlands Electricity plc merging it with their East Midlands Electricity plc business and rebranding them as Central Networks.
• 2005 – In 2005 SSE established Scotia Gas Networks to take advantage of opportunities in the Gas distribution market. Four of the eight gas distribution networks under the control of National Grid Transco were sold to private buyers. These were:
  • The North of England Distribution Network
  • The Wales and South West Distribution Network
  • The Southern England Distribution Network
  • The Scotland Distribution Network
• Whilst National Grid Transco plc retained:
  • The East Midlands Distribution Network
  • The West Midlands Distribution Network
  • The North West England Distribution Network
  • The East of England Distribution Network
• The acquirers of the Distribution Networks were respectively:
  • Northern Gas Networks
  • Wales & West Utilities
  • Scotland Gas Networks part of Scotia Gas Networks Ltd
  • Southern Gas Networks part of Scotia Gas Networks Ltd
• Also in 2005 National Grid Transco plc changed its name to National Grid plc. BNFL commenced its closure with all existing sites transferred to the Nuclear Decommissioning Authority for disposal.
• 2007 – In 2007 United Utilities Electricity was sold to North West Electricity Networks rebranding as Electricity North West Limited. Scottish Power plc was acquired by Spanish energy conglomerate Iberdrola and the brand SP Energy Networks was launched for their distribution and transmission businesses in Scotland and MANWEB.
• 2009 – In 2009, EDF acquired the nuclear generator British Energy borne from the merger of Nuclear Electricity and Scottish Nuclear in 1996.
• 2010 – In 2010 the EDF Energy DNO assets of London Electricity, SEEBOARD and Eastern Electricity were sold to new company UK Power Networks. British Energy was rebranded as EDF Energy
• 2011 – In 2011 WPD acquired the Central Networks DNO from E.ON. In 2011 CE Electric UK was rebranded as Northern Powergrid. In 2011 GDF Suez the French state gas business acquired International Power.
• 2013 – Scotia Gas Networks were rebranded as SGN.
• Today – And that is how the AEBs, AEGBs and CEGB, the forerunners of the National Grid became the energy market we have today with only National Grid retaining its original identity in the ever changing energy world.

The market, operating in the same fields looks very different today with a well recognize Big 6 backed up with businesses most people would do well to identify. Indeed what in 1972 were 14 state owned and regionally dominant businesses serving the UK’s gas and electricity needs are now 17 privately owned entities of which 10 are foreign owned.