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 Jul 2017
  • Closing: 8th Sep 2017
  • Consultations and responses, Open letters and correspondence
  • 2 Associated documents
This consultation sets out our proposed approach to removing the provisions relating to Supplemental Balancing Reserve (‘SBR’) and Demand Side Balancing Reserve (‘DSBR’) from NGET’s licence.

  • Published: 26th Jul 2017
  • Decisions
  • 1 Associated documents
This documents set out our decision to approve the Black Start Strategy and Procurement Methodology submitted by National Grid as System Operator under Special Condition 4G.

  • Published: 11th Jul 2017
  • Guidance, Reports and plans
  • 2 Associated documents
This Working Paper updates stakeholders on our latest thinking for the future electricity SO regulatory framework and incentives scheme.

  • Published: 11th Jul 2017
  • Decisions
  • 2 Associated documents
This letter sets out the formal direction that directs NGET to remove the correction to the error in the Operating Reserve Cash Price model, pursuant to Special Condition 4C.45 of the Electricity Transmission Licence.

  • Published: 3rd Jul 2017
  • Decisions
  • 2 Associated documents
The Authority’s decision on NGET's notification of feasibility study costs for the year 2016/17.

  • Published: 28th Apr 2017
  • Decisions, Open letters and 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 and 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 and 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.

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