Andy Burnham wants to take on National Grid
Key Points
- Andy Burnham announced GB Grid to compete with National Grid and SSE
- Quilter Cheviot expects the new company to have a small impact
- GB Grid's budget is dwarfed by £70 billion in planned network spending
- Burnham plans to remove the 5% VAT on electricity bills
- UK utility shares closed slightly lower after the speech
Andy Burnham has announced GB Grid, a new company set to compete with National Grid and SSE on UK grid connections.
Burnham unveiled the plan during his Labour Party Conference speech, alongside a push to lower electricity prices and the removal of the ban on public ownership of water companies.
Investment Manager Quilter Cheviot said the new company would likely have a limited effect on the UK’s existing grid operators.
“Burnham also wants to improve the electricity grid connection framework with the launch of GB Grid, an apparent competitor to National Grid and SSE, but we see any potential impact as small,” said Phil Ross, Equity Research Analyst at Quilter Cheviot.
The firm said the UK already allows competition for certain large grid projects through the CATO regulatory framework.
CATO, which stands for competitively appointed transmission owner, lets companies other than the incumbent operators bid to build and own major new transmission links.
Quilter Cheviot added that GB Grid’s reported budget is a fraction of the roughly £70 billion National Grid and SSE plan to spend on their networks over the next five years.
“Clearly Burnham wants energy infrastructure to help boost growth, but those listed businesses are going to be crucial if he is to deliver on any of his ambitions within the utilities space,” said Ross.
Burnham also plans to remove the 5% VAT charged on electricity bills, a move the firm described as a step in the right direction that would make little real difference.
The UK has some of the highest electricity prices in Europe, driven largely by the high share of gas in its power generation mix.
Quilter Cheviot said part of the gap is down to the UK adding policy and levy costs to electricity bills, where some countries fund these through general taxation.
Burnham wants renewable energy to sit at the centre of the UK’s energy mix, with nuclear power also playing a role.
The firm said it remains unclear how the government plans to break the link between gas and electricity prices.
The options include rewriting existing contracts or investing further in renewable generation and battery storage to reduce the UK’s reliance on gas.
Shares in all the UK’s listed utility companies closed slightly lower after the speech, with further detail expected in next month’s Budget.
