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: 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.

  • Published: 21st Feb 2013
  • 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 2013 OM tender.

  • Published: 21st Feb 2013
  • Decisions
  • 1 Associated documents
See a letter outlining our direction to NGG pursuant to paragraph 7 of special condition C28 and paragraph 6(b) of Special Condition C8F of NGG's Gas Transporter Licence.

  • Published: 31st Jan 2013
  • Decisions
  • 2 Associated documents
In this letter we set out our intention, following consideration of consultation responses, to direct changes to NGG’s transporter licence to implement in full our final SO incentive proposals.

  • Published: 17th Dec 2012
  • Closed: 22nd Jan 2013
  • Consultations and responses
  • 4 Associated documents
This document sets out our final proposals for National Grid Gas System Operator Incentives from April 2013. It also includes the statutory licence notice.

  • Published: 27th Jul 2012
  • Closed: 21st Sep 2012
  • Consultations and responses
  • 12 Associated documents
This document sets out our initial proposals for National Grid System Operator Incentives for gas and electricity from April 2013.

  • Published: 14th May 2012
  • Other
  • 1 Associated documents
Modification of the timescales of the projects undertaken under the Scheme of Work and the Appendix to the Scheme of Work.

  • Published: 24th Feb 2012
  • Decisions
  • 1 Associated documents
See our decision on whether competition in the provision of OM services has been effective based on NGG’s 2012 OM tender.

  • Published: 24th Feb 2012
  • Decisions
  • 1 Associated documents
Authority’s Direction to suspend the application of some of the C3 prices pursuant to paragraph 1(b) of Special Condition C3 and based on Ofgem’s decision on whether competition in the provision of Operating Margins services has been effective.

  • Published: 1st Feb 2012
  • Decisions
  • 2 Associated documents
Decision in relation to NGG’s System Operator Incentives to apply from 1 April 2012.

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