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: 14th May 2018
  • Open letters and correspondence
  • 1 Associated documents
As part of the new Electricity System Operator’s regulatory and incentives framework, we have provided our view of the ESO’s Forward Plan 2018-19.

  • Published: 27th Apr 2018
  • Decisions
  • 1 Associated documents
This letter sets out the formal direction, directing NGET to include the correction to the Model Inaccuracy in the embedded generation output in the SO Models.

  • Published: 28th Mar 2018
  • Decisions
  • 3 Associated documents
We have decided to modify NGET’s special licence conditions in order to introduce new reporting and incentive arrangements for the ESO from 2018/19 onwards.

  • Published: 27th Mar 2018
  • Decisions
  • 1 Associated documents
This letter presents the Authority’s decision to approve changes to National Grid’s C16 statements.

  • Published: 7th Mar 2018
  • Open letters and correspondence
  • 1 Associated documents
We have responded to the Electricity System Operator’s Forward Plan consultation 2018-19.

  • Published: 23rd Feb 2018
  • Decisions
  • 3 Associated documents
This is our policy decision on a new regulatory and incentives framework the Electricity System Operator from April 2018.

  • Published: 23rd Feb 2018
  • Closed: 23rd Mar 2018
  • Consultations and responses
  • 6 Associated documents
Notice of statutory consultation on a proposal to modify the special conditions of the NGET’s licence.

  • Published: 15th Dec 2017
  • Closed: 19th Jan 2018
  • Consultations and responses
  • 6 Associated documents
Consultation seeking views from stakeholders on our minded to position for the Electricity System Operator regulatory and incentive framework from April 2018.

  • Published: 1st Dec 2017
  • Closed: 26th Jan 2018
  • Consultations and responses
  • 10 Associated documents
This informal consultation seeks views on separation of National Grid’s electricity transmission licence into Transmission Owner and System Operator functions

  • Published: 29th Nov 2017
  • Decisions
  • 2 Associated documents
This letter sets out our approval of the SO Methodologies to be applied from 1 April 2017 to 31 March 2018.

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