Ofgem’s key functions include the regulation of the gas and electricity transmission assets, i.e. high voltage electricity wires and high pressure long distance gas pipelines. These are natural monopolies and therefore run by monopolists. This means that there is a need for regulation.
The systems are operated by the System Operator (SO), National Grid Electricity Transmission (NGET) plc.
Electricity transmission assets are owned and maintained by regional monopoly Transmission Owners (TOs) being NGET for England, Scottish Power Transmission Limited (SPTL) for southern Scotland, and Scottish Hydro-Electric Transmission Limited (SHETL) for northern Scotland.
Gas transmission assets are owned by National Grid Gas (NGG) plc.
The System Operator and each Transmission Owner are subject to regular price controls. This means that once every five years Ofgem approves a specific revenue for each company, thereby incentivising monopolists to improve efficiency and to keep transmission costs for electricity and gas customers low.