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: 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.

  • Published: 17th Feb 2010
  • Decisions
  • 3 Associated documents
A Direction to modify Special Condition C3 to enable the Authority to suspend the application of the C3 prices in respect of one or more LNG storage facilities and/or in respect of one or more Operating Margins requirements as set out in the licence

  • Published: 22nd Jan 2010
  • Decisions
  • 1 Associated documents
Consultation on the modification of Special Condition C8F of National Grid Gas’s gas transporter licence.

  • Published: 21st Dec 2009
  • Open letters and correspondence
  • 4 Associated documents
A letter clarifying the circumstances under which Ofgem will consider suspending the application of C3 prices for provision of OM services in 2010/11. It also sets out our proposal to modify Special Condition C3 of the GT licence with effect from Feb 2010

  • Published: 30th Nov 2009
  • Open letters and correspondence
  • 1 Associated documents
This document relating to "System Operator Incentives" provides an overview of Ofgem's initial comments on National Grid's System Operator Incentive from April 2010. This includes both Gas and Electricity System Operator Incentives.

  • Published: 16th Nov 2009
  • Other
  • 1 Associated documents
Information Provision for System Operator Incentive Scheme from April 2010.

  • Published: 28th May 2009
  • 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 2010.

  • Published: 31st Mar 2009
  • Decisions
  • 3 Associated documents
Decision in relation to System Operator Incentives to apply from 1 April 2009. Directions to modify licences of NGET and NGG in order to implement the Decision.

  • Published: 31st Mar 2009
  • Open letters and correspondence
  • 1 Associated documents
Information request to NGG in relation to System Operator Incentives scheme 2009/10

  • Published: 27th Feb 2009
  • Closed: 27th Mar 2009
  • Consultations and responses
  • 10 Associated documents
Consultation on final proposals for System Operator incentive schemes for NGET and NGG to apply from 1 April 2009.

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