Bouleversee wrote:Dod101 wrote:Hope you sleep well. But the share price and the dividend is what determines the 6% yield so it is not a question of their being 'allowed' to pay 6%.
The increases that is referred to is in the return on regulated UK assets I assume (I am writing this not having fully researched the earlier posts)
I hold National Grid and am happy to continue to do so. That is no reason for you to do so of course, but I feel happy enough with the way things are going.
Dod
I see the link I provided didn't work; sorry about that. Here is the actual text; I think the date was March 11:
Ofgem has cut returns for shareholders of UK local electricity networks by a third to keep prices low while requiring higher investment in greener energy.
National Grid
Source: Sharecast
The UK energy regulator said it would boost investment in local electricity grids to power electric cars, small-scale renewables, storage and cleaner forms of heating. Surface transport and domestic heating account for 34% of the UK's greenhouse gas emissions.
Under the new price control regime shareholders' return on equity from local electricity networks will be a maximum of 4.4% - a third lower than the previous price control. Ofgem said it had set the rates of return consistent with the average for EU regulators to keep the UK as an attractive investment.
Jonathan Brearley, Ofgem's chief executive, said: "We're driving local electricity networks to help make sure that every watt of energy produced from plant to plug is better used, for example by ramping up their use of battery storage, saving bills and the planet.
"At the same time, these financial arrangements will significantly cut investor returns to make sure consumers pay a fair price for energy whilst networks attract the investment they need to be safe and green."
I probably misunderstood it. Perhaps it means that NG and others can't make more than 4.4% profit, though that would be reflected in dividends presumably. Maybe, though it was on my NG page, it doesn't even apply to NG. Perhaps someone could translate for Grandma.
I have a (for me) quite large holding in SSE and don't have much of an urge to add to that, whereas my NG ISA holding is relatively small but I'm still dithering as to whether I want any more of this type of share at all. (Also have UU & Pennon). It does depend on the level of dividend and whether that is likely to come out of my capital. I seem to be making a small loss on my ISA NG though I did make a profit on the non-ISA holding I have just sold.
Apologies for the late response to this item, only just read it.
NG does not operate "local electricity networks", which the statement here concerning ROE ceiling refers to.
Structure of the electricity business in the UK is a bit more complicated.
Electricity Generators 'manufacture' the electricity in bulk, and sell it.
Electricity Suppliers buy from the Generators and sell it to end users, both domestic and business (this is who you get your bill from). They also pay middlemen to transport it.
The main grid is run and maintained by National Grid (in England and Wales) and SSE (in Scotland). NI is run as part of the Irish system. This grid connects generators to 14 regional Distribution Network Operators (DNOs). It is also responsible for balancing supply and demand and a host of other things. NG charges Suppliers for its services.
Distribution Network Operators (6 companies running a mix of 14 different regions) run the primary distribution, transformers and local cabling to connect supplies to your house/factory. They charge the suppliers for their services.
SSE are Generators, Grid operators (in Scotland), DNO for a couple of regions, and used to be a Supplier, but sold this bit off.
The announcement about 4.4% ROE limit applies to 'local electricity networks' which I interpret to be the DNOs - nothing to do with NG.