National Grid PLC (LSE:NG.) was downgraded as Citigroup warned that the UK windfall tax, looming regulatory risks, a squeezed consumer and "unpredictable" government actions, "makes it hard for us to be constructive" on the UK utilities sector.
"In our view, sector performance is capped by politics, until commodity prices normalise," analysts at the bank said.
However they did say "a few rare spots of sunshine" were apparent, where companies can take action and deliver relative outperformance.
As well as downgrading National Grid to 'sell', Citi also upgrade water company Pennon Group PLC (LSE:PNN, OTC:PEGRY) to 'buy' and reiterate its 'buy' recommendation on Centrica PLC (LSE:CNA) and 'sell' on Drax Group PLC (LSE:DRX).