We have published our response to the consultation by BEIS and Ofgem on the ownership of Elexon, stating our preference for industry ownership through a ‘federated model’.
Ownership of Elexon needs to change
National Grid ESO will move away from National Grid plc to become an independent, publicly-owned Future System Operator (FSO), which we fully support as an essential step towards Net Zero.
The change of ownership structure will impact on Elexon, as we are wholly owned by National Grid ESO.
The consultation by BEIS and Ofgem was published in July 2022.
Our preference for industry ownership of Elexon
BEIS and Ofgem’s preference is for Elexon to be owned by BSC Licensed Parties under a federated model. We agree with this view because it allows us to retain our independence, which has always been valued by the industry.
We also believe that industry ownership will:
- Strengthen our accountability, by having BSC Parties as owners Elexon
- Ensure least disruption to critical programmes that we are leading, including the facilitation of Market-wide Half Hourly Settlement (MHHS) and administering the Government’s new Energy Price Guarantee
- Allow us to continue to provide impartial advice on electricity policy development to Government, Ofgem and the industry.
A fall-back option was proposed in the consultation, should it not be feasible to create an industry-owned federated model by the time the FSO is established. That option is for Elexon to temporarily become a public body.
We have a number of concerns over a temporary transfer to public ownership:
- Elexon independence could be lost, even under a temporary transfer to the public sector
- Additional controls and requirements placed on public bodies could slow down operational processes and progress of the major change programmes
- There would be an unnecessary inefficient additional burden on all parties involved to temporarily put in place those controls and requirements
- The costs of having a two stage approach would fall on Generators and Suppliers, and ultimately, on consumers at a time when energy bills are already at record levels.
In the event that the preferred option (industry ownership) cannot be implemented in step with the FSO transition, industry parties suggested that a temporary transfer of Elexon ownership to National Grid (NGET) should be considered, which we agree with.
Our views on which parties should be shareholders in Elexon
We agree with BEIS that the new industry shareholders in Elexon should be licensed funding parties, generators and suppliers. In our response we are asking BEIS to consider:
- Whether the ownership should be mandatory or voluntary
- How many owners would be required in the case of a voluntary ownership model
- Whether the new ownership model could be implemented in phases, starting with a minimum core of new owners, so that quick progress can be made.
Ultimately our goal is to work with Government on an implementation plan that will achieve the new ownership model in the most efficient and effective way for all parties involved.
View from Elexon’s Chief Executive
Elexon’s Chief Executive, Simon McCalla, said:
“We strongly believe that industry ownership of Elexon is the right path for us to be on so that we remain independent from Government, Ofgem, and any one party. We have held more than 40 discussions with the potential new owners of Elexon. Their feedback demonstrates that this is a view shared by industry.
“Shared ownership and governance by industry will ensure that we continue to be fully accountable to our customers. It also allows us to get on with delivering critical pieces of work including MHHS and administration of the Energy Price Guarantee.”