National Energy System Operator (NESO) licences and other impacted licences: statutory consultation
Summary
Ofgem and DESNZ propose new licences for the National Energy System Operator (NESO), which will combine electricity system operation and gas system planning functions. NESO will hold both an Electricity System Operator licence and a Gas System Planner licence when designated as the Independent System Operator and Planner (ISOP). The consultation also proposes modifications to transmission, distribution, generation, supply, interconnector, smart meter communication, and gas transporter licences to accommodate NESO's expanded role.
Why it matters
This creates Britain's first integrated electricity and gas system operator, consolidating planning functions previously distributed across multiple entities. The structural change shifts system operation from National Grid ESO to an independent body with expanded cross-vector responsibilities, potentially improving coordination but creating new regulatory complexity across all licence categories.
Key facts
- •NESO will hold both Electricity System Operator and Gas System Planner licences
- •Consultation closed 10 May 2024
- •Modifications proposed to 14 different licence categories
- •National Grid ESO's existing transmission licence will be converted to ESO licence via Direction
Timeline
Areas affected
Related programmes
Memo
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Close alert: National Energy System Operator (NESO) licences and other impacted licences: statutory consultation Publication type: Consultation Publication date: 28 March 2024 Closed date: 10 May 2024 Status: Closed (with decision) Topic: Gas distribution, Electricity transmission, Metering Subtopic: Data Communications Company (DCC), Smart meters Decision: Response to statutory consultation on National Energy System Operator licences and other impacted licences Print this page Related links National Energy System Operator (NESO) licences and other impacted licences: statutory consultation Future System Operator: second policy consultation and project update Future System Operator (FSO) draft licences consultation Future System Operator - Draft amendments to other impacted licences Consultation on the policy direction for the Future System Operator’s regulatory framework Share the page Share on Facebook Share on Twitter Share on LinkedIn The Secretary of State for Energy Security and Net Zero proposes to grant (or treat as granted) an Electricity System Operator (ESO) and a Gas System Planner (GSP) licence, and to make modifications to the conditions of other licences. The Department for Energy Security and Net Zero (DESNZ) and Office of Gas and Electricity Markets (Ofgem) (collectively referred to as “we”) are jointly issuing this statutory consultation. The reason for these proposals is to bring together the outputs of multiple non-statutory consultations on National Energy System Operator (NESO) which, when the company is created, will be designated as the Independent System Operator and Planner (ISOP) and hold an ESO and GSP licence. This includes the licences, new roles, financial design and incentives, and consequential changes to other licences. We are also consulting on the Direction that the Secretary of State proposes that will cause National Grid Electricity System Operator Limited’s existing transmission licence to have effect as the ESO licence when NESO is designated as the ISOP. We are also consulting on modifications to the following licences which will be impacted by the designation of the ISOP: Electricity Transmission Standard Licence Conditions National Grid Electricity Transmission plc’s Special Conditions Scottish Power Transmission Special Conditions Scottish Hydro Electric Transmission Special Conditions Electricity Generation Standard Licence Conditions Electricity Interconnector Standard Licence Conditions Electricity Supply Standard License Conditions Electricity Distribution Standard Licence Conditions All Electricity Distribution Special Conditions (including additional changes to Scottish Hydro Distribution Special Conditions only) Smart Meter Communication Licence National Gas Transmission plc’s (NGT) Gas Transporter Licence (Part C) Special Conditions All other Gas Transporter Licence Special Conditions Gas Transporter Standard Special Conditions (Part A) Gas Transporter Standard Licence Conditions Update on 28 March 2024: Some of the annexes originally uploaded to our website had formatting issues. The correct versions have now been uploaded. This does not have any substantive effect on the modifications we are currently consulting on. Respond name Future System Operation Respond email FSO@ofgem.gov.uk Main document Statutory consultation on National Energy System Operator licences and other impacted licences [PDF, 611.97KB] Subsidiary documents Annex A - Notice of statutory consultation for NESO and other impacted licences [PDF, 106.25KB] Annex B - Reasons and Effects [PDF, 1.11MB] Annex C - Licensing Direction [PDF, 21.37KB] Annex D - Electricity System Operator Licence Terms [PDF, 124.03KB] Annex E - Electricity System Operator Licence Conditions [PDF, 1.59MB] Annex F - Gas System Planner Licence Terms [PDF, 123.14KB] Annex G - Gas System Planner Licence Conditions [PDF, 730.60KB] Annex H - Licence Drafting Principles [PDF, 84.33KB] Annex I - Electricity Transmission Consolidated Standard Licence Conditions MARKED UP [PDF, 1.67MB] Annex J - National Grid Electricity Transmission Consolidated Special Conditions MARKED UP [PDF, 769.89KB] Annex K - Scottish Power Transmission and Scottish Hydro Electric Transmission Special Conditions [ZIP, 1.17MB] Annex L - Electricity Generation Standard Licence Conditions [PDF, 467.59KB] Annex M - Electricity Interconnector Standard Licence Conditions [PDF, 663.38KB] Annex N - Electricity Supply Standard Consolidated Licence Conditions MARKED UP [PDF, 556.48KB] Annex O - Electricity Distribution Consolidated Standard Conditions MARKED UP [PDF, 571.36KB] Annex P - Smart Meter Communication Licence MARKED UP [PDF, 162.29KB] Annex Q - NGT SPECIALS - NTS - Consolidated Special Conditions [PDF, 3.02MB] Annex R - GT Standard Special Conditions - PART A Consolidated [PDF, 0.98MB] Annex S - GT Standard Licence Conditions [PDF, 883.07KB] Annex T - All Electricity Distribution Special Conditions [ZIP, 10.21MB] Annex U - All other Gas Transporter Licence Special Conditions [ZIP, 6.92MB] Annex V - Analytical Annex of Additional NESO Roles [PDF, 146.50KB] Print this page Related links National Energy System Operator (NESO) licences and other impacted licences: statutory consultation Future System Operator: second policy consultation and project update Future System Operator (FSO) draft licences consultation Future System Operator - Draft amendments to other impacted licences Consultation on the policy direction for the Future System Operator’s regulatory framework Share the page Share on Facebook Share on Twitter Share on LinkedIn Close