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: 29th Nov 2010
  • Open letters and correspondence
  • 2 Associated documents
A letter clarifying the circumstances under which Ofgem will consider suspending the application of Special Condition C3 prices for provision of OM services from May 2011.

  • Published: 26th Nov 2010
  • Open letters and correspondence
  • 1 Associated documents
In summary, this letter supports the reintroduction of an incentive scheme for OM and a new scheme for the environmental incentive on a two year basis; and provides initial comments on the details of these two schemes

  • Published: 22nd Jul 2010
  • Decisions
  • 1 Associated documents
Open letter which provides information on the objectives, process and timetable for the development of the SO incentive schemes to be in place from April 2011.

  • Published: 1st Apr 2010
  • Open letters and correspondence
  • 1 Associated documents
Information request to National Grid Gas in relation to System Operator Incentives scheme 2010/11.

  • Published: 30th Mar 2010
  • Decisions
  • 2 Associated documents
Decision in relation to NGG’s System Operator Incentives to apply from 1 April 2010. Direction to modify NGG’s licence in order to implement the Decision.

  • Published: 18th Mar 2010
  • Consultations and responses
  • 1 Associated documents
Response to National Grid Gas (NGG) System Management Principles Statement (SMPS) consultation

  • Published: 26th Feb 2010
  • Closed: 26th Mar 2010
  • Consultations and responses
  • 9 Associated documents
Consultation on final proposals for the System Operator incentive schemes for NGG to apply from 1 Apr 2010, including the statutory licence modification notice.

  • Published: 22nd Feb 2010
  • Decisions
  • 3 Associated documents
Authority decision to modify NGG’s gas transporters licence in respect of special condition C8F to amend the NTS Shrinkage compressor usage volume target.

  • Published: 19th Feb 2010
  • Decisions
  • 1 Associated documents
Ofgem’s decision on whether competition in the provision of OM services has been effective based on NGG’s 2010 OM tender.

  • Published: 19th Feb 2010
  • 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.

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