Critical Asset Concentration Limits

Detailed Explanation With Case Laws

1. Introduction

Critical asset concentration limits are legal and regulatory controls designed to prevent too much ownership, control or operational dependence on a small number of companies or investors in assets that are essential to the energy system.

Critical energy assets may include:

electricity generation facilities;

transmission networks;

distribution networks;

gas pipelines;

storage facilities;

interconnectors;

electricity meters;

control systems; and

other essential infrastructure.

The basic concern is:

High concentration → greater market power or systemic dependence → greater risk to competition and energy security.

Therefore, regulators may examine ownership concentration when companies acquire or merge with important energy businesses.

2. Meaning of Asset Concentration

Asset concentration occurs when one company, investor or connected group controls a substantial share of strategically important infrastructure.

For example, suppose one group controls a very large proportion of:

electricity generation capacity;

electricity-network infrastructure;

gas transmission;

electricity metering; or

interconnection capacity.

Such concentration can create risks even where ordinary competition between suppliers appears to exist.

This is because ownership of infrastructure can create structural power over other market participants.

3. Why Critical Assets Are Different

Ordinary commercial assets can often be replaced by competitors.

Critical energy infrastructure is different.

A transmission network, gas pipeline or major interconnector may be extremely difficult or expensive to duplicate.

Therefore, concentration can create:

barriers to entry;

dependence on one operator;

increased bargaining power;

foreclosure risks;

reduced investment competition;

resilience concerns; and

national-security risks.

For this reason, energy law often combines competition law, sector regulation and energy-security regulation.

4. Concentration and Competition Law

In Great Britain, mergers involving energy infrastructure can be examined under the Enterprise Act 2002 and sector-specific provisions.

The CMA has specific guidance for energy network mergers. Its current guidance explains how it assesses mergers involving energy network enterprises and the possible effect on Ofgem's ability to compare network businesses. (GOV.UK)

This is important because network regulation relies partly on comparisons between companies.

If too many comparable businesses are controlled by one ownership group, the regulator may have fewer independent benchmarks.

5. Energy Network Concentration

Electricity and gas networks are normally regulated monopolies.

A consumer cannot realistically choose between several parallel electricity distribution networks.

Therefore, regulation substitutes for ordinary market competition.

This creates a special concern where one investor acquires multiple regulated network businesses.

The regulator may examine whether ownership concentration could reduce:

benchmarking;

regulatory information;

efficiency incentives;

innovation;

independent governance; or

resilience.

6. Merger Control as a Concentration Limit

A critical-asset concentration limit does not necessarily mean that legislation establishes a simple rule such as:

"No company may own more than X% of energy infrastructure."

Instead, concentration is often controlled through merger review and regulatory approval.

The authorities may examine:

the assets being acquired;

existing ownership;

market structure;

horizontal overlaps;

vertical relationships;

national-security concerns;

regulatory benchmarking; and

effects on competition.

This allows regulators to consider the specific characteristics of each transaction.

7. Recent Example: Macquarie and Energy Assets Group

The CMA opened an investigation in 2026 into the proposed acquisition by Macquarie Asset Management of Energy Assets Group.

Energy Assets Group provides electricity and gas metering services, data services and independent installation and adoption services for last-mile utility connections. The CMA stated that it was also considering whether the transaction could prejudice Ofgem's ability to make comparisons between energy network enterprises. (GOV.UK)

This is a useful modern example because it demonstrates that concentration analysis can extend beyond traditional generation and transmission assets to metering and connection infrastructure.

8. Macquarie / Last Mile Infrastructure

The CMA previously examined Macquarie Asset Management's acquisition of a jointly controlling interest in Last Mile Infrastructure.

The transaction was cleared at Phase 1 in September 2024. The CMA nevertheless considered both ordinary competition issues and whether the transaction involved an energy network merger capable of prejudicing Ofgem's comparative regulatory assessment. (GOV.UK)

This demonstrates an important principle:

Regulatory concern does not automatically mean that a concentration is unlawful.

The transaction must be assessed according to the applicable legal tests.

9. National Security Dimension

Critical infrastructure concentration can also raise national-security concerns.

Ownership may matter because an investor can potentially obtain:

strategic control;

access to sensitive information;

influence over infrastructure investment;

access to operational systems; or

influence over supply security.

The National Security and Investment Act 2021 provides a separate framework for government scrutiny of certain acquisitions involving sensitive sectors.

Therefore, a transaction may face examination from both:

competition perspective

and

national-security perspective.

10. Relevant Case Law: National Grid v GEMA

R (National Grid Electricity Transmission plc) v Gas and Electricity Markets Authority [2018] EWCA Civ 1344

This case concerned the regulation of electricity transmission arrangements.

Its broader significance is that energy regulators must exercise their powers according to the statutory framework.

For critical-asset concentration, this means regulators cannot create ownership restrictions without appropriate legal authority.

Regulatory objectives such as competition, efficiency and resilience must be connected to the powers Parliament has granted.

11. Relevant Competition Case: SSE Generation

R (SSE Generation Ltd) v Competition and Markets Authority [2022] EWCA Civ 1472

This case concerned electricity-market regulation and charging arrangements.

The Court of Appeal considered the limits of regulatory powers and the legal consequences of an unlawful regulatory arrangement.

It is relevant to concentration regulation because it demonstrates that economic and technical regulation must remain within statutory boundaries.

A regulator cannot simply impose a structural restriction because it considers the restriction desirable.

12. Energy Market Investigation

The CMA's major Energy Market Investigation examined competition in the supply and acquisition of energy in Great Britain. The investigation identified features of the market that the CMA considered capable of restricting or distorting competition and resulted in various remedies. (GOV.UK)

The investigation demonstrates why concentration matters.

Where market power becomes concentrated, regulators may consider remedies relating to:

information;

liquidity;

competition;

customer protection;

transparency; and

market participation.

13. Horizontal and Vertical Concentration

Horizontal Concentration

This occurs when one company acquires competing assets.

Example:

Generator A + Generator B → common ownership

The concern is reduced competition between generators.

Vertical Concentration

This occurs when one company controls different stages of the energy chain.

Example:

Generation → wholesale trading → retail supply

Vertical concentration may create foreclosure risks if the company can disadvantage competitors.

Infrastructure Concentration

This occurs when an investor controls several essential networks or infrastructure businesses.

The concern may be less about ordinary competition and more about systemic dependence and regulatory benchmarking.

14. Concentration and Energy Resilience

Concentration can create resilience risks.

If one company controls a large amount of strategically important infrastructure, a financial, operational or cybersecurity failure affecting that company could have wider consequences.

Therefore, regulators may consider:

financial resilience;

operational redundancy;

cybersecurity;

disaster recovery;

emergency access;

management capability; and

alternative suppliers or operators.

Thus, concentration regulation can support energy security as well as competition.

15. Regulatory Remedies

Where concentration creates regulatory concerns, possible remedies may include:

blocking a transaction;

requiring divestment;

behavioural conditions;

access obligations;

information-sharing requirements;

governance safeguards;

ring-fencing;

independent directors; or

enhanced regulatory monitoring.

The appropriate remedy depends on the specific statutory test and evidence.

16. Importance of Independent Benchmarking

One distinctive issue in regulated energy networks is comparative regulation.

Ofgem can compare the performance and costs of network companies to establish appropriate incentives.

If many network businesses become controlled by one ownership group, the number of genuinely independent observations may decrease.

This issue is expressly recognised in the CMA's energy-network merger framework. (GOV.UK)

Therefore:

Ownership concentration → fewer independent benchmarks → potentially weaker comparative regulation.

This is particularly important for monopoly infrastructure.

17. Conclusion

Critical asset concentration limits seek to prevent excessive ownership or control of infrastructure that is essential for electricity and energy security.

They do not necessarily operate through a single fixed ownership percentage. Instead, concentration can be controlled through:

merger review + sector regulation + national-security screening + access rules + governance requirements + regulatory monitoring.

Recent CMA investigations involving Energy Assets Group and Last Mile Infrastructure show how modern concentration analysis can extend to metering, connections and other utility infrastructure. (GOV.UK)

The cases National Grid v GEMA and SSE Generation v CMA demonstrate the importance of exercising energy-regulatory powers within their statutory boundaries.

For PhD-level energy-law analysis, the central issue is the balance between investment and ownership freedom on one side and competition, regulatory benchmarking, resilience and national energy security on the other. A well-designed framework should identify genuinely critical assets, assess the consequences of concentrated control and apply proportionate safeguards while maintaining clear legal authority and regulatory accountability.