System Operator incentives

We develop System Operator (SO) incentive schemes that are designed to encourage National Grid Electricity Transmission (NGET) and National Grid Gas (NGG) to operate the electricity and gas transmission systems in an efficient and economic manner, and to effectively manage the costs of operating each system.

This is done through extensive consultation with the System Operator and other stakeholders, in order to develop a fair and efficient set of incentives.

The System Operator incentive schemes currently establish cost targets that NGET and NGG are expected to achieve in performing their roles. If actual costs are below the relevant target then NGET and NGG are permitted to receive an incentive payment, and if actual costs exceed the target then each faces an incentive penalty.

The size of this payment or penalty is determined by the relevant sharing factors (which govern the percentage of over or underspend against the target that the System Operator will retain) that are agreed as part of the overall incentive schemes. The sharing factors are in place to strike a fair balance between the risks and rewards faced by the System Operators and customers.

The maximum payment a System Operator can receive under the current incentive scheme framework is subject to an upper cap, and the maximum penalty it can be liable for is bounded by a lower collar.

You can find System Operator incentives information relating to gas and to gas/electricity issues combined in the publications and updates list below.

Publications and updates

  • Published: 28th Apr 2017
  • Decisions, Open letters & correspondence
  • 1 Associated documents
This letter sets out our decision on the costs incurred by National Grid Electricity Transmission (NGET) related to the procurement, testing and use of SBR and DSBR services during Winter 2016/17.

  • Published: 6th Apr 2017
  • Decisions
  • 3 Associated documents
This letter sets out the Authority’s decision to modify National Grid’s licence to introduce a one-year interim incentive scheme for the electricity System Operator (SO) for the period 2017/18 and establish a new regulatory framework for Black Start.

  • Published: 7th Mar 2017
  • Decisions
  • 2 Associated documents
Our decision to issue a direction to National Grid Electricity Transmission (NGET) of removing the SBR and DSBR cost recovery arrangements and obligations on NGET for 2017/18.

  • Published: 1st Mar 2017
  • Closed: 29th Mar 2017
  • Consultations & responses
  • 8 Associated documents
This document sets out our final proposal for the System Operator Incentives scheme for 2017/18. It also launches our statutory consultation on the required amendments to NGET’s licence to introduce the incentive scheme.

  • Published: 7th Feb 2017
  • Closed: 10th Mar 2017
  • Consultations & responses
  • 23 Associated documents
This consultation launches our review of how the SO regulatory framework can be designed to support our proposals for the SOs future role and structure, which we published 12 January.

  • Published: 9th Jan 2017
  • Closed: 3rd Feb 2017
  • Consultations & responses
  • 13 Associated documents
This consultation letter sets out our proposed approach to removing the Supplemental Balancing Reserve and Demand Side Balancing Reserve cost recovery arrangements for 2017/18 in light of the Early Capacity Auction for that year.

  • Published: 21st Dec 2016
  • Closed: 31st Jan 2017
  • Consultations & responses
  • 17 Associated documents
These are our initial proposals for the interim electricity System Operator (SO) incentives scheme.

  • Published: 28th Oct 2016
  • Decisions, Open letters & correspondence
  • 2 Associated documents
This letter sets out our decision to direct NGET to make an amendment to the SBR Procurement and Operational Methodologies for 2016/17 to include 31 October 2016 due to an exceptional change in circumstances since the methodologies were approved.

  • Published: 5th Oct 2016
  • Decisions, Open letters & correspondence
  • 1 Associated documents
This letter sets out our decision to approve NGET’s proposed Demand Side Balancing Reserve (DSBR) and Supplemental Balancing Reserve (SBR) Operational Methodologies.

  • Published: 29th Sep 2016
  • Decisions
  • 1 Associated documents
This letter sets out our determination of the allowed outage cost adjustment value for 2015/16 as proposed by National Grid Electricity Transmission.

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