An independent review into UK energy costs has slammed “financial engineering” by the network distribution companies for pushing up electricity prices.
The report said transmission and distribution costs made up 28% of the typical household bill in 2016 and called for National Grid to be renationalised.
Oxford university professor Dieter Helm, who carried out the review at the request of the government, said energy policy was complex and expensive, and not fit for purpose.
He said early price-control regulation had proved weak and had “facilitated significant financial engineering on the part of the companies” and encouraged “a wave of takeovers”.
Mr Helm said when privatisation took place in 1990 it was never envisaged that company balance sheets would be used to arbitrage the cost of equity and debt, and that a principal source of profit for the companies would come from financial engineering and falling interest rates.
Companies have changed hands
“Some 25 years after privatisation, almost all the distribution companies have changed hands, sometimes many times, and the electricity grid merged with the gas transmission network to form National Grid,” he said.
“They all geared up their balance sheets, and most practically exhausted them.