The establishment of the Future System Operator (FSO) is anticipated to bring substantial expenses, with one-off costs estimated to reach £390 million, according to Ofgem.
In April 2022, Ofgem and the Department for Energy Security and Net Zero agreed to create an independent FSO.
The FSO will oversee both the electricity and gas systems, aiming to achieve net zero emissions, ensure energy security and reduce costs for consumers.
Because of the FSO’s implementation, there are additional costs for the Electricity System Operator (ESO), National Grid plc (NG), and National Gas Transmission (NGT) that wouldn’t have existed otherwise.
Ofgem believes these companies should be able to recover the economical and efficient costs associated with separating the ESO from NG, transforming the ESO into the FSO and establishing the FSO’s gas activities by using price controls.
The energy regulator is currently seeking opinions on funding arrangements and mechanisms to recover these costs.
Ofgem mentioned: “We asked the companies to share details of their planned activities and the estimated costs.” Based on the information provided, it is projected that approximately £180-210 million will be spent leading up to Day 1, with a total expenditure of £300-390 million by Day 2.”
