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 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: 16th Apr 2018
  • Decisions
  • 1 Associated documents
The letter sets out our consent for National Grid Gas to revise the System Management Principles Statement (SMPS).

  • Published: 27th Mar 2018
  • Decisions
  • 3 Associated documents
This letter explains our decision to award National Grid Gas plc £207,815 for activities related to the Greenhouse Gas Investigation Mechanism.

  • Published: 27th Mar 2018
  • Decisions
  • 2 Associated documents
The Notice amends National Grid Gas's gas transporter licence to extend three System Operator incentives to the end of the RIIO-T1 price control period.

  • Published: 8th Feb 2018
  • Closed: 8th Mar 2018
  • Consultations and responses
  • 4 Associated documents
We have decided to extend three gas System Operator incentives to 31 March 2021. The notice and covering letter explain this decision.

  • Published: 28th Apr 2017
  • Decisions
  • 1 Associated documents
This document consents to National Grid Gas plc revising its System Management Principles Statement.

  • Published: 20th Apr 2017
  • Decisions
  • 1 Associated documents
In this letter, we direct National Grid Gas plc to use a different price reporting service for the NTS Shrinkage Target.

  • Published: 27th Sep 2016
  • Decisions
  • 1 Associated documents
This letter outlines the Authority’s decision to approve the Greenhouse Gas Emissions Investigation Mechanism Business Plan submitted by NGG on 28 July.

  • Published: 24th May 2016
  • Decisions
  • 1 Associated documents
In this letter, we consider National Grid Gas plc’s proposed modifications to the National Transmission System (NTS) Shrinkage Incentive Methodology Statement.

  • Published: 12th Apr 2016
  • Decisions
  • 1 Associated documents
In this letter, we grant consent to National Grid Gas plc to revise its System Management Principles Statement.

  • Published: 29th Jan 2016
  • Decisions
  • 1 Associated documents
This letter gives our decision to extend the deadline for National Grid Gas plc (NGG) to submit a business plan for the Greenhouse Gas Emissions Investigation Mechanism (GHGIMt)

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