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: 13th Mar 2008
  • Closed: 10th Apr 2008
  • Consultations and responses
  • 3 Associated documents
Letter on revised Section 23 Notice for National Grid Gas’s SO incentives from 1 April 2008, subsidiary document is statutory licence modification consultation.

  • Published: 27th Feb 2008
  • Closed: 26th Mar 2008
  • Consultations and responses
  • 3 Associated documents
Final proposals for SO incentives scheme for NGET and NGG to apply from April 2008, subsidiary documents are statutory licence modification consultations.

  • Published: 20th Dec 2007
  • Decisions
  • 1 Associated documents
Notice under Section 23 of the Gas Act 1986 (re Market Information Provision Initiative).

  • Published: 7th Dec 2007
  • Reports and plans
  • 1 Associated documents
Today National Grid published its initial proposals for the incentives schemes to apply from 1 April 2008. This document refers to Grid's initial proposals and describes the subsequent process for the development by Ofgem of its final proposals.

  • Published: 2nd Nov 2007
  • Agendas, minutes and presentations
  • 5 Associated documents

  • Published: 1st Nov 2007
  • Other
  • 1 Associated documents
The letter outlines the next steps in the System Operator Review and important process issues relating to the scheme which will apply from 1 April 2008.

  • Published: 15th Oct 2007
  • Closed: 12th Nov 2007
  • Consultations and responses
  • 2 Associated documents
The licence modification has been proposed in order to ensure that the licence is consistent with NGG’s implementation of the Market Information Provision Initiative (MIPI).

  • Published: 8th Aug 2007
  • Closed: 28th Sep 2007
  • Consultations and responses
  • 13 Associated documents
This document and the supplementary appendixes set out our initial thoughts on the review of gas and electricity system operator functions and incentives

  • Published: 18th May 2007
  • Decisions
  • 3 Associated documents
During 2007 we will be undertaking a review of the role and functions of the system operator (SO) in both gas and electricity, including the existing SO incentive schemes that apply to electricity and gas transmission in Great Britain.