National Energy System Operator (NESO) licences and other impacted licences: statutory consultation

Update: 2 April 2024

Some of the annexes originally published here on 28 March had formatting issues, so we republished them later that day.

There were no changes to the modifications we are consulting on.

Ofgem and the Department for Energy Security and Net Zero are jointly consulting on 2 Ofgem regulated licences for the National Energy System Operator (NESO) which cover its obligations regarding electricity and gas functions.

The consultation document also acts as a response to previous consultations and includes connected announcements.

Government and Ofgem previously set out a commitment to create a publicly owned body, the Future System Operator (now called NESO), as an impartial expert, with responsibilities across both the electricity and gas systems.

The 2 licences will be regulated by Ofgem:

• an Electricity System Operator (ESO) licence covering its obligations regarding its electricity functions
• a Gas System Planner (GSP) licence covering its obligations regarding its gas functions

The licences will include conditions for:

• the business conduct and independence of NESO
• its strategic and operational functions
• its roles including the provision of advice and information to government
• its obligations concerning energy industry codes and charging

We are now consulting on:

• a proposal to grant (or treat as granted) an Electricity System Operator and a Gas System Planner licence
• modifications to various licence conditions which will be impacted by the creation of NESO and the designation of the Independent System Operator and Planner (ISOP)

We are consulting on these 2 elements now because they weren’t covered in our previous consultation, and are required for the NESO’s Day 1 licences.  

We also provide: 

• a response to the August 2023 government and Ofgem joint FSO [NESO] second policy consultation
• a response to the September 2023 Ofgem non-statutory consultation on draft ESO and GSP licence conditions
• a response to the December 2023 Ofgem proposed draft amendments to other impacted licences which would be required as a result of designating NESO
• a response to the December 2023 Ofgem consultation on policy direction for the FSO [NESO] regulatory framework
• an update on inclusion of Strategic Spatial Energy Planning (SSEP) in the NESO licence
• an update on inclusion of Centralised Strategic Network Planning (CSNP) and Future Energy Pathways in the NESO licence

This consultation brings together the outputs of multiple non-statutory consultations across NESO licences, new roles, financial design and incentives, and consequential changes to other licences.

It provides the complete proposed NESO Day 1 licence conditions, subject to the conclusion of this consultation.

How to respond

Please copy your responses to both:

• nesoproject@energysecurity.gov.uk
• FSO@ofgem.gov.uk