NESO regulatory framework: Associated Documents for the BP3 period

We want to hear your views on our draft NESO Licence Expectations and Performance Arrangements Governance documents.

We are consulting on proposals for 2 documents that support the implementation of National Energy System Operator’s (NESO) regulatory framework for the RIIO-2 Business Plan 3 (BP3) period:

• the Licence Expectations Document (previously called the Roles Guidance)
• the NESO Performance Arrangements Governance Document

These guidance documents will accompany NESO’s licences. They explain our detailed expectations and requirements for regulating NESO’s performance over the BP3 period, which starts on 1 April 2025 and ends on 31 March 2026.

Who should respond

We want to hear views from NESO and its stakeholders.

Background

NESO is an expert, impartial body with key responsibilities across the energy sector. It has objectives related to driving progress towards net zero while maintaining energy security and minimising costs for consumers.

We regulate NESO to ensure its actions align with the interests of consumers. On 1 October 2024, we implemented our first phase of changes to NESO’s regulatory framework to reflect NESO’s new organisational structure and roles. This included introducing 2 new licences and updates to key documents associated with these licences.

In November 2024 we made a decision on the key features of NESO’s performance framework for the RIIO-2 BP3 period, which is our second phase of regulatory framework changes.

Our proposals

We are developing revised versions of 2 key documents which will help to to  implement our decision on NESO’s regulatory framework for the BP3 period.

Changes to the Licence Expectations Document

This replaces the NESO ‘Roles Guidance’ document. It provides guidance on the behaviours we expect from NESO for it to meet its licence obligations. We have:

• made structural changes to the guidance, including new chapters that replace the roles-based categories
• made changes to reflect our decision that the Licence Expectations Document will now only set licence expectations, and not incentives expectations
• updated our minimum expectations to reflect key changes to some of NESO’s activities

Changes to the Performance Arrangements Governance Document

We have changed NESO’s performance incentives framework for the BP3 period. To reflect that we have:

• updated the incentives timelines and processes, to reflect the change to a one-year assessment period for BP3
• updated our evaluation guidance to reflect our new assessment approach, which is based on NESO’s achievement of its business plan aims and its delivery of value for money
• updated the reporting framework for NESO to align with the new incentives framework
• simplified and streamlined the document

Why your views matter

Your feedback will help us develop the final versions of these documents.

How to respond

Please send us your feedback to our proposed framework by 5 March 2025 by emailing nesoregulation@ofgem.gov.uk. You can also send a PDF (pdf), Word (doc) or Excel (xls) file as part of your response.