System Operator Incentives

Why They Matter

As the System Operator (SO) of the gas National Transmission System (NTS), National Gas is subject to regulatory incentives, which encourage us to maintain and improve our operational efficiency.

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If you have any queries about SO incentives, please contact the team. 

Why do we have SO incentives?

SO incentives replicate the commercial pressures that would typically exist in a fully competitive market. These financial and reputational performance measures are established by our regulator, Ofgem, to drive behaviours that deliver value for consumers and stakeholders. 

Our SO incentives today 

The RIIO-3 price control period started in April 2026 and lasts for five years. Under this framework, we have agreed a set of outputs with our stakeholders and deliver these in return for an allowance agreed Ofgem

How are SO incentives set?

SO incentives are reviewed and renegotiated at defined intervals under Ofgem’s regulatory framework for gas, known as RIIO (Revenue = Incentives + Innovation + Outputs). Some incentive schemes have been in place prior to the RIIO framework. 

  • The RIIO framework was first introduced during the RIIO-1 price control period (2013–2021). 
  • It was reset for RIIO-2 (2021–2026). 
  • The current framework applies to RIIO-3 (2026–2031).

Summary on Financial and Reputational Incentives

Most of our current incentives, whether financial or reputational are aligned to the System Operator (SO) side of the business, with Customer and Stakeholder Satisfaction and the Environmental Action Plan incentives being led by National Gas Transmission (NGT).

Financial Incentives include the following:

Capacity Constraint Management

ensures we maximise the capacity available to users of the network over and above our obligations, reduce the number of constraints or manage those constraints that do arise when capacity exceed the physical capability of the network.

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Demand Forecasting 

to provide a demand forecast ahead of the demand day, this incentive is to be as accurate as possible with that demand, as this forecast feeds into Shippers forecasting processes for balancing demand requirements.

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NTS Shrinkage

encourages efficient trading when we replace the gas we use to management the system

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Residual Balancing

should we need to step into the market to ensure our system remains in our operational parameters.

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Maintenance

encourages us to maximise alignment of our maintenance alongside our customers and minimise changes to that agreed plan

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Greenhouse Gas Emissions

encourages us to consider the environmental impact of our network use and maintenance operations.

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Reputational incentives include the following:

Data Publication

obligations that drive high standards in how we provide information to the market, and encourages high‑quality, timely and transparent publication of operational data.

Demand forecasting (two-to-five day ahead)

 forecasting demand for two to five days ahead helps the industry make efficient decisions

UAG (Unaccounted for Gas)

reporting, which reinforces accountability and transparency around system losses.

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Operating Margins (OM)

used to manage the short‑term impacts of operational stresses when market responses are insufficient, or to provide support during system events where immediate intervention is required.

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This reflects that our performance is driven not only by the formal financial mechanisms within the RIIO framework, but equally by our reputation, stakeholder confidence, and operational excellence. Taken together, these incentives highlight that our focus extends well beyond monetary outcomes. Our reputation, quality of service, and the trust placed in us by stakeholders are central to how our performance is evaluated.

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Further incentive development 

Our new environmental incentive schemes, Greenhouse Gas Pipeline Emissions and Greenhouse Gas Fugitive Emissions are currently undergoing baselining and further consultation within RIIO-3. Performance measures for these schemes will be finalised as part of the ongoing RIIO-3 process led by Ofgem, with implementation expected from year 3 of the price control period. 

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General overview and performance

General overview and performance

For a general overview of gas SO incentives, and to view our performance across quarters and annually please refer to our supporting information documents. Details of previous consultations and schemes are available under Data and Documents below.

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