Definitions and glossary of terms

Our aim is to use plain English in this Annual Report and Accounts. However, where necessary, we do use a number of technical terms and/or abbreviations and we summarise the principal ones below, together with an explanation of their meanings. The descriptions below are not formal legal definitions.

A
American Depositary Shares (ADSs)
Securities of National Grid listed on the New York Stock Exchange, each of which represents five ordinary shares.
Annual General Meeting (AGM)
Meeting of shareholders of the Company held each year to consider ordinary and special business as provided in the Notice of AGM.

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B
Board
The Board of Directors of the Company (for more information see Board of Directors).
BritNed
BritNed Development Limited.
brownfield
The term generally used to describe previously developed land, which may or may not be contaminated.

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C
consolidated financial statements
Financial statements that include the results and financial position of the Company and its subsidiaries together as if they were a single entity.
called up share capital
Shares (common stock) that have been issued and have been fully paid for.
carrying value
The amount at which an asset or a liability is recorded in the balance sheet.
circuit length
See route length.
Combined Code
The Combined Code on Corporate Governance, soon to be replaced by the UK Corporate Governance Code, being guidance on how companies should be governed applicable to UK listed companies, including National Grid.
the Company, National Grid, we, our or us
We use terms ‘the Company’, ‘National Grid’, ‘we’, ‘our’ or ‘us’ to refer to either National Grid plc itself or to National Grid plc and its subsidiaries collectively, depending on context.
contingent liabilities
Possible obligations or potential liabilities arising from past events for which no provision has been recorded, but for which disclosure in the financial statements is made.

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D
decoupling
See revenue decoupling.
deferred tax
For most assets and liabilities, deferred tax is the amount of tax that will be payable or receivable in respect of that asset or liability in future tax returns as a result of a difference between the carrying value for accounting purposes in the balance sheet and the value for tax purposes of the same asset or liability.
derivative
A financial instrument or other contract where the value is linked to an underlying index, such as exchange rates, interest rates or commodity prices. In most cases, contracts for the sale or purchase of commodities that are used to supply customers or for our own needs are excluded from this definition.
dollars or $
Except as otherwise noted all references to dollars or $ in this Report are to the US currency.

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E
employee engagement index
A key performance indicator, based on the percentage of favourable responses to certain indicator questions repeated in each employee survey, which provides a measure of how employees think, feel and act in relation to National Grid. Research shows that a highly engaged workforce leads to increased productivity and staff retention, therefore we use employee engagement as a measure of organisational health in relation to business performance.
equity
In financial statements, the amount of net assets attributable to shareholders.

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F
FERC
The US Federal Energy Regulatory Commission.
finance lease
A lease where the asset is treated as if it was owned for the period of the lease and the obligation to pay future rentals is treated as if they were borrowings. Also known as a capital lease.
financial year
For National Grid this is an accounting year ending on 31 March. Also known as a fiscal year.
FRS
A UK Financial Reporting Standard as issued by the UK Accounting Standards Board. These apply to the Company’s individual financial statements, which are prepared in accordance with UK GAAP.

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G
Grain LNG
National Grid Grain LNG Limited.
Great Britain
England, Wales and Scotland.
GW
Gigawatt, being an amount of power equal to 1 billion watts (109 watts).
GWh
Gigawatt hours, being an amount of energy equal to delivering 1 billion watts of power for a period of one hour.

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H
HSE
Health and Safety Executive, the main safety regulator in the UK.

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I
IAS or IFRS
An International Accounting Standard or International Financial Reporting Standard, as issued by the International Accounting Standards Board. IFRS is also used as the term to describe international generally accepted accounting principles as a whole.
individual financial statements
Financial statements of a company on its own, not including its subsidiaries or joint ventures.
IFRIC
The International Financial Reporting Interpretations Committee, which provides guidance on how to apply accounting standards.

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J
joint venture
A company or other entity which is controlled jointly with other parties.

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K
KeySpan
KeySpan Corporation and its subsidiaries, acquired by National Grid on 24 August 2007.
kV
Kilovolt, being an amount of electric force equal to 1,000 volts.

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L
Lifetime Allowance
The lifetime allowance is an overall ceiling on the amount of UK tax privileged pension savings that any one individual can draw.
LNG
Liquefied natural gas, being natural gas that has been condensed into a liquid form, typically at temperatures at or below -163°C (-260°F).
lost time injury
An incident arising out of National Grid’s operations which leads to an injury where the employee or contractor normally has time off the following day or shift following the incident. It relates to one specific (acute) identifiable incident which arises as a result of National Grid’s premises, plant or activities, which was reported to the supervisor at the time and was subject to appropriate investigation.
lost time injury frequency rate
The number of lost time injuries per 100,000 hours worked in a 12 month period.

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M
MW
Megawatts, being an amount of power equal to 1 million watts.
MWh
Megawatt hours, being an amount of energy equal to delivering 1 million watts of power for a period of one hour.

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N
National Grid Metering
National Grid Metering Limited, National Grid’s UK regulated metering business.
New England
The term refers to a region within the northeastern US that includes the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. National Grid’s New England operations are primarily in the states of Massachusetts, New Hampshire and Rhode Island.
northeastern US
The northeastern region of the US, comprising the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.

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O
Ofgem
The UK Office of Gas and Electricity Markets, part of the UK Gas and Electricity Markets Authority (GEMA), which regulates the energy markets in the UK.
OnStream
Utility Metering Services Limited, National Grid’s UK unregulated metering business.
ordinary shares
Voting shares entitling the holder to part ownership of a company. Also known as common stock. National Grid’s ordinary shares have a nominal value of 1117/43 pence.

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P
PAS 55
PAS (Publicly Available Specification) 55 is a universal benchmark published by the British Standards Institution (BSI) for the optimal management of physical assets.
Personal Lifetime Allowance
The lifetime allowance applicable to individuals who registered their pre 6 April 2006 UK pension benefits for protection.
price control
The mechanism by which Ofgem sets restrictions on the amounts of revenue we are allowed to collect from customers in our UK businesses. The allowed revenues are intended to cover efficiently incurred operational expenditure, capital expenditure and financing costs, including a return on equity invested.

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R
rate base
The base investment on which the utility is authorised to earn a cash return. It includes the original cost of facilities, minus depreciation, an allowance for working capital and other accounts.
rate plan
The term given to the mechanism by which a US utility regulator sets terms and conditions for utility service, including in particular tariffs and rate schedules. The term can mean a multi-year plan that is approved for a specified period, or an order approving tariffs and rate schedules that remain in effect until changed as a result of a future regulatory proceeding. Such proceedings can be commenced through a filing by the utility or on the regulator’s own initiative.
regulated controllable operating costs
Total operating costs under IFRS less depreciation and certain regulatory costs where, under our regulatory agreements, mechanisms are in place to recover such costs in current or future periods.
regulatory asset value (RAV)
The value ascribed by Ofgem to the capital employed in the relevant licensed business. It is an estimate of the initial market value of the regulated asset base at privatisation, plus subsequent allowed additions at historical cost, less the deduction of annual regulatory depreciation. Deductions are also made to reflect the value realised from the disposal of certain assets that formed part of the regulatory asset base. It is also indexed to the retail price index to allow for the effects of inflation.
revenue decoupling
Revenue decoupling is the term given to the elimination of the dependency of a utility’s revenue on the volume of gas or electricity transported. The purpose of decoupling is to eliminate the disincentive a utility otherwise has to encourage energy efficiency programmes.
route length
The route length of an electricity transmission line is the geographical distance from the start tower to the end tower. In most cases in the UK, and in many cases in the US, the transmission line consists of a double circuit for additional reliability. In such cases, the circuit length is twice the route length.
RPI–X@20
A project conducted by Ofgem to review the workings of the current approach to regulating Great Britain’s energy networks and develop future policy recommendations, which is expected to have an impact on future price controls.

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S
SEC
The US Securities and Exchange Commission, the financial regulator for companies with registered securities in the US, including National Grid and certain of its subsidiaries.
share premium
The difference between the amounts shares are issued for and the nominal value of those shares.
shrinkage
Shrinkage is the difference between the amount of gas entering the system and that which is billed to consumers, due to either transportation consumption or loss. This difference is mainly made up of gas leakage from distribution mains and certain activities and equipment which vent gas. Shrinkage also occurs when gas is stolen or not charged for in error.
standard cubic metre
A quantity of gas which at 15°C and atmospheric pressure (1.013 bar) occupies the volume of 1m3.
stranded cost recoveries
The recovery of historical generation-related costs in the US, related to generation assets that are no longer owned by us.
subsidiary
A company or other entity that is controlled by National Grid.

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T
treasury shares
Shares that have been repurchased but not cancelled.
tonne
A unit of mass equal to 1,000 kilograms, equivalent to approximately 2,205 pounds.
tonnes carbon dioxide equivalent
A measure of greenhouse gas emissions in terms of the equivalent amount of carbon dioxide.
TWh
Terawatt hours, being an amount of energy equal to delivering 1 billion watts of power for a period of 1,000 hours.

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U
UK
The United Kingdom, comprising England, Wales, Scotland and Northern Ireland.
UK GAAP
Generally accepted accounting principles in the UK. These differ from IFRS and from US GAAP.
Uniform Network Code
The legal and contractual framework for the supply and transport of gas in the UK, comprising a common set of rules for all industry participants which ensure competition can be facilitated on level terms.
US
The United States of America.
US GAAP
Generally accepted accounting principles in the US. These differ from IFRS and from UK GAAP.

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V
vanilla return
Metric used by Ofgem to define the allowed rate of return within the price control reviews for our UK regulated businesses. Our calculation uses IFRS business performance operating profit adjusted for various items to reflect the replacement of certain IFRS based accounting treatments with a regulatory based treatment. Primarily these items are depreciation, capital costs, pensions and taxation. The adjusted IFRS operating profit is divided by the regulatory asset value inflated to mid year to generate a percentage rate of return.

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