Northern Electric plc
Strategic Report for the Year Ended 31 December 2025
The directors present their annual report and audited consolidated financial statements for the year ended 31 December
2025 of Northern Electric plc (the "Company"), which have been drawn up and are presented in accordance with the
Companies Act 2006 (the “CA06”).
Business model
The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies (the
“Northern Powergrid Group”) and acts as a holding company of Northern Powergrid (Northeast) plc (“NPg Northeast”),
Integrated Utility Services Limited (“IUS”) and Northern Powergrid Metering Limited (“NPg Metering”), alongside other
smaller companies, collectively, (the “Group”).
NPg Northeast is an authorised distributor under the Electricity Act 1989 and holds a licence granted by the Secretary of
State. As a distribution network operator (“DNO”), NPg Northeast is regulated by the Office of Gas and Electricity
Markets (“Ofgem”), which in turn, is governed by the Gas and Electricity Markets Authority (“GEMA”). Ofgem requires
the DNOs to operate within a regulatory framework known as a price control, the purpose of which is to protect the
interests of end consumers by setting an upper limit on the amount the DNOs can charge for the use of their networks. On
31 March 2025, NPg Northeast completed the second year of the RIIO-ED2 price control, which became effective on 1
April 2023, and will conclude on 31 March 2028 (the “ED2 period”).
The principal activity of NPg Northeast is the distribution of electricity to approximately 1.6 million customers connected
to its electricity distribution network (the “Network”) within its distribution services area in the northeast of England,
which extends from North Northumberland, south to York and west to the Pennines. The Network includes over 42,000
kilometres (“km”) of overhead and underground cables and over 28,000 substations. Electricity is received from National
Grid's transmission system and from generators connected directly to the Network, and is then distributed at voltages of up
to 132 kilovolts.
Revenue generated by NPg Northeast is primarily controlled by a distribution price control formula which is set out in the
electricity distribution licence. The price control formula does not directly constrain profits from year-to-year but is a
control on revenue that operates independently of a significant portion of the NPg Northeast’s costs. Allowed revenue is
recovered from electricity suppliers via the application of Distribution use of System charges. These charges account for
approximately 8% of the electricity end users' overall electricity bill. NPg Northeast’s opening base allowed revenue
(excluding the effects of incentive schemes, volume or legislative driven adjustment mechanisms, any contract liabilities
from the prior price control, and real price effects) has been set and provides NPg Northeast with some stability in terms of
its income during the ED2 period. Opening base allowed revenues increased in line with inflation (as measured by CPI-H).
IUS provides engineering contracting services and NPg Metering rents meters to energy suppliers.
Strategy
In common with the Northern Powergrid Group, the Group operates a strategy based on six core principles (the "Core
Principles"), which comprise Financial Strength, Customer Service, Operational Excellence, Employee Commitment,
Environmental Respect and Regulatory Integrity. The Core Principles (which are applied by the Northern Powergrid
Group’s parent company, Berkshire Hathaway Energy Company ("Berkshire Hathaway Energy"), set out the basis on
which the Company generates shareholder value over the longer-term and defines the standards by which the Northern
Powergrid Group holds itself accountable. Each Core Principle is defined by a strategic objective which is linked to the
commitments made in the Company’s business plan (available via the Northern Powergrid Group website) for the ED2
period (the “Business Plan”). The directors refer to the values established by the Core Principles and the commitments
contained within the Business Plan when considering the consequence of decisions they make.
The delivery of the Business Plan is supported by an annual business plan (the “Annual Plan”) which is submitted to the
Northern Powergrid Group’s shareholder each financial year and is designed to phase progress towards the achievement of
each commitment over the ED2 period. This ensures that the deliverables in both plans can be measured effectively by
using a mix of financial and non-financial Key Performance Indicators (“KPIs”).
The Strategic Report focuses on each Core Principle and the performance of the associated KPIs throughout the year in
order to provide a summary of the success in achieving each strategic objective, progress made against certain Business
Plan commitments and performance in relation to the Annual Plan.
As the largest contributor to the Group in terms of revenue, the Strategic Report primarily concentrates on the performance
and progress of NPg Northeast throughout the reporting year.
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