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

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