National Grid has been spared from being broken up as plans for a new, separate electricity system operator has been announced.
The government and Ofgem have proposed to establish a legally, independent operator within National Grid to create “greater separation” between its system operator role and the rest of the group.
The new system operator will have distinct employees, directors and offices from other National Grid electricity subsidiary companies.
National Grid owns and maintains the electricity transmission and gas distribution networks, runs the system to make sure the lights stay on and owns assets such as interconnectors that bring power into the country from other nations.
Critics have said the system operator function should be separated out of the overall group.
Last year, MPs on the Energy and Climate Change Committee called for National Grid to be broken up, with the introduction of an independent system operator.
They said potential conflicts of interests that were raised during an inquiry would undermine the development of low carbon network infrastructure.
The new independent operator’s role includes balancing the power grid “second by second” and working more closely with local electricity distribution network operators to manage flows across the grids.
Dermot Nolan, Chief Executive of Ofgem, said: “We need a more flexible energy system so that we can make the transition to a lower carbon future. A more flexible system will also ensure customers get the most out of new smart technologies.
“As the system changes, it’s important that all the monopoly networks adapt. Having a legally separate system operator will allow it to take on a more proactive role in managing the system and working with others, while mitigating any conflicts of interest.”
National Grid welcomed the announcement, stating it is the “best approach” to meet the needs of a changing energy market.
CEO John Pettigrew said: “We believe National Grid is best placed to deliver the role of System Operator, especially during a time when the energy landscape is changing rapidly.”
Ofgem has launched a consultation, which will run until 10th March.