It's not gridlock but a lock on the Grid that is a good thing for National Grid. It is the sole owner and operator of the electricity transmission system in England and Wales. It transmits electricity through about 4,500 miles of overhead and underground lines to distribution utilities serving more than 52 million people. National Grid also operates the UK natural gas transmission and distribution system (serving 10.9 million homes and businesses) through its National Grid Gas subsidiary. However, it is the company's Northeastern US gas distribution and power generation, transmission, and distribution operations, led by National Grid USA, that bring in the bulk of the company's revenues.
In fiscal 2015 (March year end), the US accounted for 53% of revenues; the UK, 47%.
In the US the company distributes power to about 3.5 million customers in Massachusetts, New Hampshire, New York, and Rhode Island, and natural gas to 3.6 million clients in those states. It also manages the electricity distribution network in Long Island.
National Grid owns the high-voltage electricity transmission network in England and Wales, and operates the high pressure gas transmission system in Britain.
The electricity industry connects generation sources to homes and businesses through transmission and distribution networks. National Grid produces electricity from fossil fuel and nuclear power stations, as well as renewable sources such as wind and solar. In the US, National Grid owns and operates 50 fossil fuel-powered stations on Long Island and 4.6 MW of solar generation in Massachusetts.
It operates the transmission network in England and Wales and also operates Scottish networks. The company is working in a joint venture with Scottish Power Transmission to construct an interconnector to reinforce the transmission system between Scotland and England and Wales. In the US, it jointly operates transmission facilities spanning upstate New York, Massachusetts, New Hampshire, Rhode Island, and Vermont.
The company's gas industry connects producers, processors, storage, transmission and distribution network operators, as well as suppliers to industrial, commercial, and domestic users. Gas used in the UK is mainly sourced from gas fields in the North and Irish seas, piped from Europe and imported as LNG. Gas used in the US is produced mainly in North America. National Grid owns and operate Grain LNG, an importation terminal and storage facility at the Isle of Grain in Kent.
Sales and Marketing
The company sells electricity under a long-term contract power supply agreement. It delivers gas to 10.9 million consumers in the UK and 3.6 million customers in the US. The customers buy gas in U.S. via independent providers.
In fiscal 2015 National Grid's net revenues increased by 3% (in local currency) driven by higher revenues in the UK Electricity Transmission business, reflecting increases in allowed Transmission Owner revenues, and higher core allowances and pass-through costs in UK Gas Transmission.
Revenues in the UK Gas Distribution business were slightly lower as a result of changes in allowed revenues for replacement expenditure. US Regulated businesses revenues were also lower as a result of the end of the LIPA Management Services Agreement in the previous year, partially offset by revenue increases from existing rate plans, together with additional income from gas customer growth, and the impact of the strengthening US dollar.
Net income decreased by 18% (in local currency) due to an increase in operating costs, as the result of higher controllable costs (including the impact of inflation and additional costs to improve data quality and bring regulatory filings up to date); higher US bad debt costs following an exceptionally cold winter; and higher depreciation and amortization as a result of continued investment programs. These cost increases were partly offset by a reduction in spend on US financial systems implementation and stabilization upgrades.
National Grid's cash from operating activities increased by 25% (in local currency) due to changes in exceptional items, re-measurements and stranded cost recoveries, working capital (principally in the US due to the collection of high winter charges and other settlements including Superstorm Sandy reinsurance claims and LIPA receipts).
The company's long-term strategy is to focus on large-scale power and gas systems in the UK and the US and to better integrate its various operations.
National Grid continues to work on developing additional interconnector projects (including opportunities for interconnection with Iceland, Denmark and a further link with France). In the UK, it is expanding gas system enhancement investment programs and developing electric grid modernization plans.
The company also continues investments in US programs, investing in electricity and gas infrastructure to improve resilience and help reduce the impact of service interruptions. It is also investing in mobile technology.