Funding for the National Energy System Operator (NESO) will come entirely from consumers, with all costs recovered through a method known as ‘fast money’.
Ofgem has opened a consultation on the principles and methods that will guide the NESO Financial Handbook.
The handbook will outline how the NESO’s financial model will be applied and operated.
The consultation will explore various principles that underpin the transition to the new NESO regime.
These include operating NESO under a not-for-profit model to maintain ‘cash neutrality’ and ensure that consumers are not disadvantaged by the shift to the new system.
Financial regulation of NESO will be conducted on an ‘actual basis’, differing from the current ‘notional approach’ used for the Electricity System Operator (ESO).
The energy regulator said the revenue framework will align with the requirements of the Connection and Use of System Code (CUSC) and follow the same timeline as the RIIO-2 ESO.
Ofgem has acknowledged that there may be instances where some principles may conflict.
In such cases, the aim will be to find a balance that best meets the overall objectives.
