Ofgem Unveils Nation
Grid Incentive Proposal
Feb 28, 2007 datamonitor Energy
UK energy regulator Ofgem has published
its final proposals for the incentive arrangements
it places on National Grid to encourage the efficient
running of the high-voltage electricity transmission
Ofgem believes that it is in the
interests of customers who pay for the cost of the
operation of the electricity system that National
Grid is incentivized to operate the system as efficiently
The regulator is proposing that National
Grid's System Operator costs should be between GBP430
million to GBP445 million from April 2007 to March
2008. The incentive scheme will reward National
Grid for keeping costs below GBP430 million, but
it will have to face its share of the costs if they
rise above GBP445 million.
Under these incentives National Grid's
rewards and its share of any increased costs above
GBP445 million are capped at GBP10 million.
Last year, Ofgem regulated National
Grid's running costs directly after the firm refused
to sign up to the incentive scheme it proposed.
If National Grid does not sign up this new incentive
scheme, Ofgem could again regulate the firm's costs
directly or refer the issue to the Competition Commission.