Source · Select Committees · Environmental Audit Committee
Recommendation 46
46
Acknowledged
Paragraph: 161
National Energy System Operator consolidating significant functions and responsibilities
Conclusion
The National Energy System Operator (NESO), an organisation currently under development, is consolidating a number of existing functions while also taking on a number of new responsibilities, such as giving advice to the Government and working with local authorities through a new regional energy system planning process. The NESO will be a powerful and influential body: it will be expected to carry out many tasks that in other national energy systems would fall to an energy agency or other independent technical body.
Government Response Summary
The government agrees with the importance of appropriate governance for NESO and outlines the robust systems, processes, and regulatory oversight by Ofgem, as well as the independent board appointments, framework document, and shareholder representation in place for the organisation. These arrangements will be continually monitored.
Paragraph Reference:
161
Government Response
Acknowledged
HM Government
Acknowledged
The Government agrees with this recommendation and is committed to ensuring appropriate governance and regulatory arrangements to ensure that NESO delivers the benefits expected to the GB energy system. NESO’s licenses include obligations to implement and maintain robust systems, processes, and governance arrangements to uphold impartiality. Ofgem will be delivering effective regulation of NESO and ensuring that NESO delivers for the GB energy system. Ofgem will undertake ongoing monitoring of NESO’s performance as well as biennial holistic performance reviews with a panel of industry stakeholders. Ofgem is also planning to apply appropriate oversight of the policy for senior staff remuneration, and, at the board level, there will be strict criteria on non-executive director appointments, with at least half of NESO’s non-executive directors meeting the standard of ‘Sufficiently Independent Directors’ under licence. The Government has put in robust governance arrangements, including a clear framework document outlining the roles and responsibilities of the parties involved in the relationship. A new, independent Chair, Dr Paul Golby, has been appointed to lead NESO’s Board and UK Government Investments (UKGI) have been commissioned as the Secretary of State’s Shareholder Representative, a role which includes providing a Shareholder Representative Non-Executive Director to NESO’s Board. These arrangements will be continually monitored and, if appropriate, revised to ensure they remain fit for purpose.