Decision to update the 6 January 2025 derogation and exemption regarding Mandatory Frequency Response (MFR)
Summary
Ofgem has approved NESO's request to increase the derogated volume of Mandatory Frequency Response (MFR) procurement from 120 MW to 300 MW — a 150% increase. The derogation allows NESO to procure MFR earlier than day-ahead and for contract periods up to one month, bypassing standard Grid Code procurement rules. All other terms of the January 2025 derogation remain unchanged, with expiry on 31 December 2029.
Why it matters
The volume increase signals that NESO's frequency management challenge is growing faster than anticipated when the original derogation was granted 15 months ago. This is a pragmatic fix — longer-term contracts at larger volumes give NESO procurement certainty — but it is also an administered workaround that moves volume away from competitive day-ahead markets into bilateral longer-duration contracts, reducing price discovery at the margin.
Key facts
- •Derogated MFR volume increased from 120 MW to 300 MW
- •Derogation allows procurement earlier than day-ahead and contracts up to one month
- •Original derogation granted 6 January 2025, expires 31 December 2029
- •NESO requested the increase on 27 February 2026
- •No other terms of the derogation were changed
Timeline
Areas affected
Memo
Decision to update the 6 January 2025 derogation and exemption regarding Mandatory Frequency Response (MFR) | Ofgem Please enable JavaScript in your web browser to get the best experience. BETA This site is currently in BETA. Help us improve by giving us your feedback . Close alert: Decision to update the 6 January 2025 derogation and exemption regarding Mandatory Frequency Response (MFR) Publication type: Transparency document Publication date: 31 March 2026 Topic: Electricity distribution, Electricity transmission Print this page Related links Decision to grant NESO a derogation and exemption for mandatory frequency response (MFR) Share the page Share on Facebook Share on Twitter Share on LinkedIn Outcome of National Energy System Operator (NESO)’s request to amend its derogated MFR volume from 120 MW to 300 MW. On 6 January 2025, we granted NESO a derogation and an exemption, under which NESO could procure MFR, a frequency response product, at a time earlier than day-ahead, and for a contract period longer than one day but not longer than one month. The derogation and exemption remain in effect until 31 December 2029. Under the 2025 decision, the derogated volume of MFR was up to 120 MW. On 27 February 2026, NESO requested an increase to the derogated volume to 300 MW, with no changes sought to any other terms of the granted derogation and exemption. This letter sets out our rationale for granting the requested increase to the derogated volume and the necessary next steps. Documents Decision to update the 6 January 2025 derogation and exemption regarding Mandatory Frequency Response [PDF, 154.12KB] Print this page Related links Decision to grant NESO a derogation and exemption for mandatory frequency response (MFR) Share the page Share on Facebook Share on Twitter Share on LinkedIn Close