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Segmental reporting

In addition to presenting the consolidated financial results and financial position in the financial statements, we provide a breakdown of those results and balances into our business segments. The presentation of segment information is based on management responsibilities that existed at 31 March 2008 and the external and regulatory environments in which we operate. Our business segments are Transmission UK, Transmission US, Gas Distribution UK, Gas Distribution US, Electricity Distribution & Generation US, with our non-regulated businesses, other operations and corporate activities, including business development, being aggregated within other activities. Our geographical segments reflect our principal activities in the UK and the US.

Discontinued operations comprise the Ravenswood generation station in New York City, KeySpan Communications and KeySpan Engineering Associates, the sales of which we expect to complete within one year of their acquisition date, together with our wireless infrastructure operations in the UK and the US, and the Basslink electricity interconnector in Australia which were sold on 3 April, 15 August and 31 August 2007 respectively.

Discontinued results in prior years also include the results of the four gas distribution networks sold on 1 June 2005, which had previously been part of our Gas Distribution UK segment.

The business segments presented are different from those presented in the 2006/07 Annual Report in that the Electricity Distribution US segment has changed its name to Electricity Distribution & Generation US, and stranded cost recoveries have been included within the Electricity Distribution & Generation US segment in line with our management structure. However, management performance for that segment is based on operating profit excluding stranded cost recoveries (in addition to excluding exceptional items and remeasurements) and so stranded cost recoveries are still separately identified within the financial statements given their importance in understanding our financial performance.

The activities of both the Gas Distribution US and Electricity Distribution & Generation US segments have expanded since last year as a consequence of the acquisition of KeySpan. Gas Distribution US now incorporates gas distribution activities in New York City, Long Island, Massachusetts and New Hampshire in addition to our existing upstate New York and Rhode Island gas distribution networks. Electricity Distribution & Generation US (formerly Electricity Distribution US) now incorporates the generation of power on Long Island, together with the operation of the Long Island electricity transmission and distribution network on behalf of the Long Island Power Authority.