- Ofgem consulted on the detailed implementation of NESO’s enduring regulatory framework, which will take effect from 1 April 2026 and transition NESO away from the RIIO price control model. This follows Ofgem’s August 2025 decision to introduce a more dynamic, targeted and proportionate regulatory approach designed to support NESO in delivering major energy system outcomes while maximising value for consumers. The consultation proposed changes to NESO’s ESO and GSP licences and related documents, including clearer minimum performance standards, new requirements linking senior staff pay to performance, enhancements to the performance assessment process, the introduction of an Independent Challenge Panel to evaluate NESO’s performance, and streamlined cost and financial reporting arrangements.
- Energy UK broadly welcomes these proposals but has raised concerns about gaps in transparency and accountability that could weaken the framework’s effectiveness in regulating NESO’s performance. In particular, Energy UK is concerned about the proposed approach to implementing principles-based requirements on performance-related pay for senior NESO staff. As this is one of Ofgem’s key levers for influencing NESO’s behaviour, Energy UK considers it essential that the selected mechanism is sufficiently robust to maintain strong incentives for compliance with licence obligations and to provide Ofgem with clear enforcement powers in cases of non-compliance. Greater clarity on the processes and criteria Ofgem will use to assess and approve these decisions would be welcome.
- Energy UK also supports Ofgem’s wider review and rewrite of NESO’s core licence obligations and guidance, including the introduction of a remediation mechanism that would allow Ofgem to address performance issues on an ongoing basis rather than only at fixed review points. However, further detail is needed on how this mechanism would operate in practice. More broadly, Energy UK is calling for stronger transparency across the framework, including improved visibility of performance evidence, issues raised through stakeholder engagement, and discussions and actions agreed between Ofgem and NESO, to ensure that both industry and the Independent Challenge Panel can effectively scrutinise NESO’s performance.
Downloads
-
Energy UK response to Ofgem’s consultation on the implementation of NESO’s enduring regulatory framework
Type: PDF (150 KB)