The credit quality of National Grid Electricity System Operator Limited (NG ESO, Baa1 stable) is supported by a regulatory framework that provides relatively stable and predictable cash flow until March 2026, and modest leverage, with cash pooled at NG ESO's parent companies exceeding the company's debt in each of the last three financial years.

Credit quality is constrained by NG ESO's exposure to timing differences that are sizeable in the context of its asset-light business. The removal of NG ESO's exposure to network charges for the current price control has significantly reduced NG ESO's exposure to fresh timing differences, but this benefit has been increasingly offset by regulatory decisions that have permitted larger timing differences on balancing costs.

NG ESO manages its substantial liquidity risks with both a £550 million intercompany facility from its ultimate parent company National Grid plc (Baa2 stable) and a £550 million revolving credit facility maintained with external banks. As a result, we align NG ESO's rating with the credit quality of the National Grid group, which we view as commensurate with a Baa1 rating.

In April 2022, the UK government and Great Britain's energy regulator (Ofgem) announced their intention to create a Future System Operator (FSO) that will take on NG ESO's roles. National Grid expects the transition to take place before the end of 2024.