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.