By Jaime Llinares Taboada

U.K. energy regulator Ofgem said Monday that it has recommended creating an independent electricity system operator fully separate from National Grid PLC.

The watchdog said the separation would help "avoid any perceived or real potential conflict of interest" as the U.K. heads towards the transition to a net-zero energy system.

The system operator--which is responsible for managing the power transmission system and supporting the planning and coordination of networks--became a separate entity within National Grid in 2019. Ofgem is now recommending fully separating National Grid ESO from its parent, as the scale of the net zero challenge could require additional responsibilities and greater independence.

In addition, Ofgem estimates the spin-off could save British consumers 400 million pounds-4.8 billion pounds ($547.4 million-$6.57 billion) in 2022-2050. "Full separation would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible," the regulator said.

Ofgem also said there is a good case for separating gas system-operation functions from National Grid, although this requires further consideration.

National Grid reported an adjusted operating profit of GBP146 million from its power system operator for the year ended March 31, which compares with a group-wide operating profit of GBP3.45 billion.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

(END) Dow Jones Newswires

01-25-21 0410ET