National Grid Stock

National Grid plc engages in the transmission and distribution of electricity and gas in the Great Britain and the northeastern U.S.

Segments

The company operates through UK Electricity Transmission, UK Electricity Distribution, UK Electricity System Operator, New England, New York, and National Grid Ventures (NGV) and Other segments.

UK Electricity Transmission

This segment principally generates revenue by providing electricity transmission services in England and Wales. The company’s business operates as a monopoly regulated by Ofgem (the U.K. Office of Gas and Electricity Markets), which has established price control mechanisms that set the amount of annual allowed returns its business can earn (along with the Scottish and Offshore transmission operators amongst others).

The transmission of electricity encompasses the following principal services:

The supply of high-voltage electricity – revenue is recognised based on usage; and

Construction work (principally for connections) – revenue is recognised over time, as the company provides access to its network. Customers can either pay over the useful life of the connection or upfront.

UK Electricity Distribution

This segment principally generates revenue by providing electricity distribution services in the Midlands and South West of England and South Wales. Similar to UK Electricity Transmission, UK Electricity Distribution operates as a monopoly in the jurisdictions that it operates in and is regulated by Ofgem.

The distribution of electricity encompasses the following principal services:

Electricity distribution – revenue is recognised based on usage by customers (over time), based upon volumes and price.

Construction work (principally for connections) – revenue is recognised over time as the company provides access to its network. Where the customer pays upfront, revenues are deferred as a contract liability and released over the life of the asset.

UK Electricity System Operator

The UK Electricity System Operator earns revenue for balancing supply and demand of electricity on Great Britain’s electricity transmission system, where it acts as principal. Balancing services are regulated by Ofgem and revenue, which is payable by generators and suppliers of electricity, is recognised as the service is provided.

The UK Electricity System Operator also collects revenues on behalf of transmission operators, principally National Grid Electricity Transmission plc and the Scottish and Offshore transmission operators, from users (electricity suppliers) who connect to or use the transmission system. As the UK Electricity System Operator acts as an agent in this capacity, it records transmission network revenues net of payments to transmission operators.

New England

This segment principally generates revenue by providing electricity and gas supply and distribution services and high-voltage electricity transmission services in New England. Supply and distribution services are regulated by the Massachusetts Department of Public Utilities (MADPU) and transmission services are regulated by the Federal Energy Regulatory Commission (FERC), both of whom regulate the rates that can be charged to customers.

The supply and distribution of electricity and gas and the provision of electricity transmission facilities encompasses the following principal services:

Electricity and gas supply and distribution and electricity transmission – revenue is recognised based on usage by customers (over time). Revenues are billed monthly and payment terms are 30 days; and

Construction work (principally for connections) – revenue is recognised over time as the company provides access to its network. Where the customer pays upfront, revenues are deferred as a contract liability or customer contributions (where they relate to government entities) and released over the life of the connection.

New York

This segment principally generates revenue by providing electricity and gas supply and distribution services and high-voltage electricity transmission services in New York. Supply and distribution services are regulated by the New York Public Service Commission (NYPSC) and transmission services are regulated by the Federal Energy Regulatory Commission (FERC), both of which regulate the rates that can be charged to customers.

The supply and distribution of electricity and gas and the provision of electricity transmission facilities encompasses the following principal services:

Eelectricity and gas supply and distribution and electricity transmission – revenue is recognised based on usage by customers (over time). Revenues are billed monthly and payment terms are 30 days; and

Construction work (principally for connections) – revenue is recognised over time as the company provides access to its network. Where the customer pays upfront, revenues are deferred as a contract liability or customer contributions (where they relate to government entities) and released over the life of the connection.

National Grid Ventures

National Grid Ventures generates revenue from electricity interconnectors, liquefied natural gas (LNG) at the Isle of Grain, National Grid Renewables and rental income.

The company recognises revenue from transmission services through interconnectors and LNG importation at the Isle of Grain by means of customers’ use of capacity and volumes. Revenue is recognised over time and is billed monthly. Payment terms are up to 60 days.

Electricity generation revenue is earned from the provision of energy services and supply capacity to produce energy for the use of customers of Long Island Power Authority (LIPA) through a power supply agreement, where LIPA receives all of the energy and capacity from the asset until at least 2028. The arrangement is treated as an operating lease within the scope of the leasing standard where the company acts as lessor, with rental income being recorded as other revenue, which forms part of total revenue. Lease payments (capacity payments) are recognised on a straight-line basis and variable lease payments are recognised as the energy is generated.

Other revenue principally includes sales of renewables projects from National Grid Renewables to Emerald Energy Venture LLC (Emerald), which is jointly controlled by National Grid and Washington State Investment Board (WSIB). National Grid Renewables develops wind and solar generation assets in the U.S. (The United States of America, its territories and possessions; any state of the United States) and the District of Columbia., whilst Emerald has a right of first refusal to buy, build and operate those assets. Other revenue includes adjustments in respect of the interconnector cap and floor regime constructed by Ofgem for certain wholly owned interconnector subsidiaries.

Other

Revenue in this segment relates to the company’s UK (The United Kingdom, comprising England, Wales, Scotland and Northern Ireland) commercial property business and insurance. Revenue includes property sales by the company’s UK commercial property business (including sales to the company’s 50% share in the St William joint venture (St William Homes LLP) which was disposed of in the prior year). Property sales are recorded when the sale is legally completed.

History

The company was founded in 1990. It was incorporated in 2000.