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: 14th Sep 2015
  • Guidance
  • 1 Associated documents
This document provides guidance to National Grid Gas Plc (NGG). It explains the application process, requirements and evaluation criteria of the Greenhouse Gas Investigation Mechanism (GHGIM).

  • Published: 19th Jun 2015
  • Decisions
  • 2 Associated documents
This letter sets out the Authority’s decision to introduce the System Operator (SO) incentive scheme for the period 2015-18.

  • Published: 8th Jun 2015
  • Decisions
  • 1 Associated documents
In this letter we approve the National Grid Gas System Management Principles Statement submission for 2015/16. This will take effect from 1 April 2015.

  • Published: 19th Mar 2015
  • Decisions
  • 0 Associated documents
Following responses to this consultation we published our final proposals on the extension of the current framework. Licence conditions applying to this framework took effect from 1 April 2015.

  • Published: 19th Mar 2015
  • Closed: 16th Apr 2015
  • Consultations and responses
  • 3 Associated documents
In this consultation we are seeking views on our final proposals on the three gas System Operator incentives which are due to expire.

  • Published: 27th Oct 2014
  • Decisions
  • 0 Associated documents
Following this consultation we published our initial proposals and then final proposals on the extension of the current framework. Licence conditions applying to this framework took effect from 1 April 2015.

  • Published: 27th Oct 2014
  • Closed: 24th Nov 2014
  • Consultations and responses
  • 7 Associated documents
In this consultation we are seeking views on our initial proposals on the three gas SO incentives which are due to expire on 31 March 2015 and on 31 March 2016.

  • Published: 27th Jun 2014
  • Decisions
  • 1 Associated documents
A letter outlining Ofgem issuing a direction to NGG pursuant to paragraph 8D.3 of Special Condition 8D and paragraph 3D.38 of Special Condition 3D of NGG’s Gas Transporter Licence.

  • Published: 15th Apr 2014
  • Closed: 15th May 2014
  • Consultations and responses
  • 6 Associated documents
We are seeking views on the future of three gas System Operator incentives which are due to expire. We are consulting on all three incentives at the same time to minimise the burden on industry.

  • Published: 26th Feb 2014
  • Decisions
  • 2 Associated documents
A letter to industry participants regarding Ofgem’s decision on whether competition in the provision of OM services has been effective based on NGG’s 2014 OM tender.

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