US RTO opportunity

National Grid Group PLC
28 August 2001

National Grid Group plc (NGG)

28 August 2001

NATIONAL GRID SELECTED TO BE MANAGING MEMBER

OF US FOR-PROFIT ALLIANCE REGIONAL TRANSMISSION ORGANISATION

National Grid announced today that it has been selected to be managing member
of the Alliance Transco, a proposed US for-profit independent transmission
company, which would operate as the Alliance Regional Transmission
Organisation (Alliance RTO) upon approval by the Federal Energy Regulatory
Commission (FERC).

The Alliance RTO, which was substantially approved by the FERC on 24 January
2001, is expected to manage the electric transmission systems of 10 companies
in 11 states, including Indiana, Illinois, Kentucky, Michigan, Missouri, North
Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.
Together, these companies serve a population of approximately 41 million,
represent a peak load of roughly 108 gigawatts, and own 57,100 miles of
transmission lines. The concurring Alliance Companies have proposed to the
FERC that the Alliance Transco be formed as a limited liability company and
managed by an independent managing member. It would seek to commence operation
on 15 December 2001, in line with the FERC's target date.

National Grid and the concurring Alliance Companies have reached agreement on
the essential terms of the relationship. It is conditional upon the
negotiation and execution of definitive agreements and regulatory approvals,
including the FERC's finding that National Grid is not a market participant
pertaining to the Alliance RTO and approval of the National Grid/Alliance RTO
arrangements.

In a recent directive, the FERC called for the formation of regional
transmission organisations to promote the creation of large electricity
markets and to provide reliable, cost-efficient service to customers. The
Alliance RTO is anticipated to be the first transmission organization of its
kind in the United States to substantially fulfill the FERC's competitive
market initiatives set out in that order.

Roger Urwin, National Grid Group chief executive, said, 'This is an important
development for National Grid, providing an excellent opportunity to leverage
our skills and complement our existing operations in the northeastern US. We
are very pleased that the Alliance recognises that our experience gained in
the UK, along with our existing US expertise, will enable us to manage this
major transmission network efficiently, and in a way that provides reliable,
cost-efficient services to customers.'

As part of the agreement in principle, National Grid would make a $75 million
(£50 million) initial capital investment in the Alliance RTO. In addition, as
the RTO develops and as participating Alliance RTO companies elect to
contribute transmission assets to the Alliance, the agreement provides for
National Grid to invest between 5-20% of the value of assets contributed to
the Alliance, or a higher percentage upon mutual agreement, subject to various
limitations. Alliance member company Commonwealth Edison already has announced
its intention to divest its transmission assets, with a gross book value in
excess of $1 billion, into the Alliance Transco.

Over the life of the initial seven-year contract, National Grid expects to
receive a fee of $14 million annually, subject to adjustment, to manage the
Alliance's transmission assets. Those assets have a gross book value of
approximately $12 billion. National Grid also would be eligible to receive
incentive-based earnings, subject to FERC approval, by delivering customer
savings in tandem with enhanced system reliability.

Stan Szwed, chairman of the Alliance Companies' Management Committee and
FirstEnergy vice president responsible for transmission commented, 'The
concurring Alliance Companies strongly support the petition of National Grid
to be our managing member. National Grid has an excellent track record for
managing transmission assets effectively and in a way that is responsive to
ensuring reliable delivery of energy.'

In May 2001, National Grid petitioned the FERC for a determination that it is
not a 'market participant' and therefore an eligible candidate for managing
member of the Alliance RTO. In response to the FERC's July request for
additional information, National Grid yesterday submitted an additional filing
demonstrating how the company will meet, by the Alliance's operation date, the
FERC's independence requirements by divesting any remaining economic interests
of affiliates in the power generation and supply markets.


Enquiries:


National Grid:

Analysts:

Marcy Reed                     + 44 (0) 20 7312 5779

Terry McCormick                + 44 (0) 20 7312 5785

Media:

Clive Hawkins                   + 44 (0) 20 7312 5757

Citigate Dewe Rogerson:         + 44 (0) 20 7638 9571

Anthony Carlisle                + 44 (0) 7973 611888 (m)