Source · Select Committees · Environmental Audit Committee
Recommendation 47
47
Accepted
Paragraph: 162
Establish robust corporate governance and performance review arrangements for the National Energy System Operator
Recommendation
We recommend that Ministers establish appropriate arrangements for review of the role and performance of the NESO against the benefits it is expected to deliver to the GB energy system, including good value for money and high performance. It is essential that, from the outset, this significant new body has robust corporate governance arrangements, including a functioning and independent board.
Government Response Summary
The government accepts the recommendation and has established robust governance and regulatory arrangements for NESO, including Ofgem's ongoing monitoring and biennial performance reviews, strict board appointment criteria, an independent Chair, and UKGI as Shareholder Representative. These arrangements will be continuously monitored.
Paragraph Reference:
162
Government Response
Accepted
HM Government
Accepted
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.