Following this consultation, a decision on the funding of the transition to a Future System Operator was published on Thursday 28 September 2023.
In April 2022, Ofgem and the Department for Energy Security and Net Zero (DESNZ) jointly decided to proceed with the creation of a new, independent Future System Operator (FSO). This will be an expert, impartial body with responsibilities across both the electricity and gas systems, to drive progress towards net zero while maintaining energy security and minimising costs for consumers.
The implementation of the FSO creates transition costs for the Electricity System Operator (ESO), National Grid plc (NG) and National Gas Transmission (NGT) that they would not otherwise have incurred. We consider that these companies should be able to recover through price controls economic and efficient costs associated with separating the ESO from NG, transforming the ESO into the FSO, and establishing the FSO’s gas activities.
We are now seeking views on our set of funding proposals for cost recovery mechanisms that will allow NG and NGT to recover efficient and economic costs incurred as part of their separation activities up to Day 1, the point at which ownership of the ESO is transferred from NG to government. We are also seeking views on our proposals for a reporting framework to ensure ongoing transparency over ESO and NG’s delivery of separation plans and actual spend.
Alongside this consultation, we have published a supporting annex produced by NG at Ofgem’s request. The annex sets out a non-exhaustive summary of key operational issues and indicative initial estimates of associated operational costs for the separation of the ESO and transfer to the FSO identified by NG.
This consultation is open for 6 weeks, until 02/08/2023. Responses should be sent to FSO@ofgem.gov.uk and clearly marked where considered to be confidential.