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: 31st Jan 2012
  • Closed: 27th Mar 2012
  • Consultations and responses
  • 12 Associated documents
Proposed objectives, policy and principles for the regulation of the gas and electricity System Operators from April 2013.

  • Published: 14th Dec 2011
  • Closed: 18th Jan 2012
  • Consultations and responses
  • 3 Associated documents
This letter sets out our final proposals for National Grid Gas System Operator Incentives from April 2012.

  • Published: 23rd Sep 2011
  • Decisions
  • 1 Associated documents
Update on setting gas system operator incentives from 1 April 2012.

  • Published: 14th Jun 2011
  • Closed: 26th Jul 2011
  • Consultations and responses
  • 9 Associated documents
We set out our initial views on the principles we consider should underpin longer term gas and electricity System Operator incentive schemes.

  • Published: 6th Jun 2011
  • Decisions
  • 1 Associated documents
Direction issued pursuant to Special Condition C28: Requirement to develop and undertake a Scheme of Work to facilitate the establishment of a long term external gas system operator incentive to reduce targeted greenhouse gases.

  • Published: 17th May 2011
  • Open letters and correspondence
  • 1 Associated documents
An open letter concerning the rollover of National Grid Gas (NGG) system operator incentives that are due to expire on March 31st 2012.

  • Published: 26th Apr 2011
  • Open letters and correspondence
  • 1 Associated documents
Information request to National Grid Gas in relation to System Operator Incentives scheme 2011/12

  • Published: 30th Mar 2011
  • Decisions
  • 2 Associated documents
Decision in relation to NGG’s System Operator Incentives to apply from 1 April 2011. Direction to modify NGG’s licence in order to implement the Decision.

  • Published: 1st Mar 2011
  • Closed: 29th Mar 2011
  • Consultations and responses
  • 3 Associated documents
Setting out our final proposals for two gas SO incentive schemes relating to Operating Margins gas and GHG emissions from compressor venting for NGG.

  • Published: 24th Feb 2011
  • 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.

Pages