NATIONAL GRID PLC

In managing the business, we focus on various non-IFRS alternative performance measures (APMs) and

regulatory performance measures (RPMs) which provide meaningful comparisons of performance between

years, monitor the strength of the Group’s balance sheet and ensure profitability reflects the Group’s

regulatory economic arrangements. Such APMs and RPMs are supplementary to, and should not be

regarded as a substitute for IFRS measures, which we refer to as statutory results.

Our business performance as set out in our regulatory agreements can differ from accounting under

IFRS, principally because our regulators allow for regulatory deferral accounting. Our allowed revenues

are set in accordance with our regulatory price controls or rate plans. Statutory IFRS does not allow us

to recognise regulatory assets or liabilities (for the difference between collected and allowed regulatory

revenues). As a result we use a suite of APMs (defined by us) to help measure and monitor our underlying

regulated business performance. We explain the basis of these measures and, where practicable,

reconcile these to statutory IFRS results (i.e. GAAP) in Other unaudited financial information on pages

236 – 247. Our RPMs have been calculated for the total Group (or individual entities where relevant)

and these are not based on IFRS measures. Specifically, we measure the financial performance of the

Group from different perspectives:

–Accounting profit: In addition to statutory IFRS measures we report adjusted results (i.e. before

exceptional items and remeasurements), and underlying results, which further take account of:

i) volumetric and other revenue timing differences arising from our regulatory contracts; (ii) major storm

costs (net of in-year allowances and deductibles) which are recoverable in future periods when they

exceed a $100 million threshold; and (iii) deferred tax in our UK regulated businesses (NGET and

NGED). In doing so, we intend to make the impact of such items clear to users of the financial

information in this Annual Report.