The chief executive of National Grid, the UK energy group, has called for a change in the way energy markets are regulated to encourage suppliers to sell less gas and electricity.

In an interview with the Financial Times, Steve Holliday said efforts to cut carbon emissions through energy efficiency would fail without major regulatory incentives. "Energy companies have clearly been motivated by selling units of energy," he said. "You've got to turn this completely on its head."

National Grid owns a large gas and electricity distribution business in the US, and its revenues are linked to how much energy is used by customers. Mr Holliday said a new political awareness of the need to fight climate change was triggering changes in energy regulation in certain states.

"In the US, we are having detailed discussions in New York and Massachusetts about how we change the regulatory framework to incentivise companies to be massive proponents of energy efficiency. I couldn't imagine having these discussions even two years ago."

Mr Holliday said the UK government and Ofgem, the energy regulator, should also consider bringing in incentives for suppliers to sell less energy. "Someone has got to think outside the box. There is so much that can be done [to reduce energy use] in the UK. We are the worst in the Western world, as we have so much old housing stock."

Current efforts to encourage energy efficiency in Britain, such as the government's "energy efficiency commitment", did not go far enough. "I don't think we are working on energy efficiency as much as we could, and it is the cheapest step to carbon emissions reduction."

National Grid is pressing the government to look at the installation of "smart meters" - devices that tell households exactly how much energy they are using and how much it is costing them. The most advanced smart meters can also be read remotely by energy companies, enabling them to influence energy use by the introduction of peak tariffs.

Plans for smart meters have been circulating for years, but the devices are expensive and energy companies are reluctant to fit them for customers in case they switch to another supplier. "The easy answer would be to give responsibility for the meters to companies running the distribution network," said Mr Holliday, whose group is the main operator of the UK's energy distribution networks. "But I think it can be done competitively." He suggested that regional metering contracts should be sold off by Ofgem, and said that National Grid would be a keen bidder.

Although it is not responsible for as many greenhouse gas emissions as companies that generate power, such as British Gas and Npower, National Grid is working on reducing its carbon footprint in the UK. "Our carbon emissions fell 15 per cent last year," said Mr Holliday. One area where National Grid can cut its emissions is by using waste heat from its gas transmission and distribution businesses to generate power.

In the US, National Grid will spend $168m this year on energy efficiency measures - mainly helping people to use less energy. Mr Holliday said his group was moving towards being a supplier of "energy management services", rather than just energy.

Source: Financial Times.

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