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: 1st Dec 2017
  • Closing: 26th Jan 2018
  • Consultations and responses
  • 4 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.

  • Published: 31st Oct 2017
  • Decisions
  • 1 Associated documents
This letter sets out decision to reject the proposed solution to the Operating Reserve Cash Price model.

  • Published: 9th Oct 2017
  • Decisions
  • 2 Associated documents
This letter sets out our determination of the allowed outage cost adjustment value for 2016/17 as proposed by NGET.

  • Published: 29th Sep 2017
  • Decisions, Open letters and correspondence
  • 2 Associated documents
This open letter sets out our decision to remove the remaining provisions relating to Supplemental Balancing Reserve (‘SBR’) and Demand Side Balancing Reserve

  • Published: 28th Jul 2017
  • Closed: 8th Sep 2017
  • Consultations and responses, Open letters and correspondence
  • 6 Associated documents
This consultation sets out our proposed approach to removing the provisions relating to SBR and DSBR from NGET’s licence.

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

  • Published: 11th Jul 2017
  • Guidance
  • 4 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.

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