Oral evidence: Work of NESO, HC 599

Oral evidence, 28 October 2026.

Witnesses

Fintan Slye and Kayte O’Neill.

Chair

Welcome to this morning’s session of the Energy Security and Net Zero Committee. We have a one-off session on the work of NESO and we welcome Kayte O’Neill, the chief operating officer and Fintan Slye, the chief executive. Fintan, I believe you would like to make some opening remarks so over to you please.

Fintan Slye

Thank you very much, Chair, and thank you for inviting us to the committee today. We appreciate the opportunity to provide evidence. I would like to start by acknowledging the publication last week of the independent report into whistleblower allegations made against NESO. While this investigation by Eversheds Sutherland (International) LLP did not substantiate any of the four allegations made against NESO, it did identify other organisational and cultural issues where we need to improve. The report made seven specific recommendations, all of which have been accepted by the board; acting on those findings and delivering those recommendations is a priority for me, the executive and the full board. Last week also saw the interim report of the Ofgem-commissioned review into system and market operations during the extreme heat at the end of June. I do not want to prejudge the final report findings, which will come out later this year, but we know from the interim report that it was an exceptional period of extreme weather that placed significant stress on the electricity system in Great Britain, as well as on electricity systems right across Europe. Despite this, our operations and control room teams did a phenomenal job; no customer demand was disconnected and the frequency remained within required statutory limits at all times. I understand there is significant interest in these processes, and I am sure we will speak about them this morning. The board and executive team take all these matters very seriously. Alongside these though, it is important to highlight key areas where we have made significant progress and delivered major outcomes since we were last in front of this Committee. We have advanced the once-in-a-generation reformation of the connections queue to our electricity system, and we have made significant progress around strategic energy planning, submitting the strategic spatial energy plan pathways to the Secretary of State and standing up the regional energy strategic planning process. We continue to operate one of the most reliable electricity systems in the world and have saved consumers over £1.2 billion in constraint costs over the last number of years. Undoubtedly, we still have a huge amount of work to do and lessons to learn, but we will continue to make progress. I am absolutely confident that NESO, and most importantly, the great people who work for us tirelessly day in day out, will continue to deliver a secure electricity system today and help design a resilient energy system for tomorrow. In doing all this we will keep the interests of consumers absolutely front of mind, as it is for them that the system must deliver in the long run.

Chair

Thank you very much for your opening comments, which prompts a number of questions on its own. Given your admissions around the organisational and cultural challenges NESO faces, should you and your chair be significantly more visible in explaining publicly what NESO is doing, what your priorities are, and why things are happening? Do you agree that is one of the key lessons here, and do you intend to make such a change?

Fintan Slye

There is certainly a point around making sure that the work that NESO does is explained in a really transparent, objective and open way. We are a relatively young organisation, having only existed for just over two years, and we do not yet have the recognition that other organisations have. Throughout the summer we were cautious not to prejudice the outcome of those two reviews by speaking too publicly about them. However, only two weeks ago I was interviewed on stage at the Energy UK industry conference. Also, I was interviewed by Rachel Millard from the Financial Times at the Financial Times conference, and I recently attended the Public Accounts Committee with colleagues from Ofgem and DESNZ. I would say increasing our visibility, presence and public explanation of our role is absolutely something we are looking to do.

Chair

I am not convinced it sounded as though you thought that was necessarily your role.

Fintan Slye

As chief executive that is absolutely my role, but this is a big organisation and I have colleagues, such as Kayte and others on the executive team, who all need to be out there representing us. However, as the chief executive of the organisation I take responsibility for that.

Chair

It has been described to me that the challenges of the energy transition are that the electrification of system means more grid generation and storage—the fastest change in a generation—all while keeping consumer bills down, bringing communities with us, and keeping our climate commitments. Assuming you accept that definition of the challenge, how well is NESO performing against that metric?

Fintan Slye

The challenge for the energy industry, and indeed for NESO, is to balance those three things: security of energy supply, affordability for consumers, and the transition to a sustainable energy system. This is an energy transition across the industry. There are bits of it that we are leading on and bits of it that we are participating in. However, one of the big transitions that we are part of delivering is reformation of the connections queue; that is a once-in-a-generation change in how we think about connecting to the electricity system. We have progressed that; it is now progressing to plan, and people are getting the connection offers that they need to connect.

Chair

The engineers say it is an engineering challenge and if they are given the appropriate challenge they will meet it. Do you agree with that?

Fintan Slye

In terms of managing the increased complexity—

Chair

Yes, in bringing those three elements along together. The engineers say it is feasible; they just need to be tasked with doing so. Do you agree with that?

Fintan Slye

Absolutely, and that is what the engineers in NESO are doing in terms of trying to ensure that we keep the system secure while managing the increased complexity as we move from a fossil fuel-based system to a more renewable-based system. It is undoubtedly more complex. However, we have brilliant engineers right across the energy system who are absolutely dedicated to making sure that we marry those three things up.

Chair

One of the criticisms we hear—it came out somewhat in the reporting over the summer—is that, for some reason, there is resistance or delay in using the latest technology: for example, digitisation of the grid is where we get efficiencies from and it enables better use of demand flexibility. Is that a fair criticism: that NESO is not embracing technology and the use of AI as fast as it could?

Kayte O’Neill

Actually technology and the use of AI is hugely important to us in a number of places; we use it ourselves in our ways of working in the organisation and in the control room, but also in how we think about the value of data, digitalisation, AI, and technology enhancements across the sector, where our control room and our teams are connecting with market providers and market participants and the work that they are doing. I would say we have actually seen some really great progress. We are nearing completion of a very significant technology change out programme in the control room. We have introduced new systems and new processes for colleagues, giving them much better visibility of what is going on in the system and much greater ability to optimise. That is within our own control room day to day as we balance the system. We have also taken on a real leadership role in engaging with the industry on the value of being able to share data and information. We want to be able to do that in a real, standardised way, creating the potential for that data to be used, to think about how we plan the system for the very long term, how we operate markets to deliver what the control room needs, and then to be able to make use of that.

Chair

Thank you for that. I was looking at a pilot example that goes to what you were saying, Fintan, about curtailment costs. It is a pilot example of a heavy user of electricity being paid to use electricity during periods where you would otherwise be paying to curtail wind farm production. They have set up the system and storage to benefit from it, and yet they are not being allowed to use it because NESO never gives them the consent to do so. Allied to that, it got me thinking: if this is something that NESO is looking at, why is it not being rolled out more quickly? Why are we not already there with encouraging heavy energy users more widely to benefit from this option of storing electricity, rather than paying to switch it off?

Fintan Slye

Obviously I do not know the specifics of the example that you quote, but there are maybe two things to highlight. First, the use of flexibility in a widespread sense, down to household level, was something that NESO pioneered through the ESO previously with the demand flexibility scheme. We have recently run a really significant further innovation trial with partners called CrowdFlex around how we build out and expand that. On the subject of industrial and commercial consumers and how they do that, one part of that is what signals NESO gives; the other part of it is how the market rewards that type of flexibility. Really, NESO should just be stepping in as the residual balancer in the market, when in the first instance the market should resolve that. What we need to look at is how we make sure that the right signals and market incentives are there, so that the type of situation that you describe, where an industrial customer that has some storage assets and maybe has some flexible load can operate in a way where the value that they deliver back to the system is recognised, either in cheaper electricity, or a payment stream for that flexibility. We are working with Alexon as the market facilitator on that, and the flexibility commissioner who has been appointed, to look at all the mechanisms we can use to achieve that. We are hugely supportive of enabling demand flexibility. We see it as part of the long-term solution. It was one of the first things listed in our clean power advice to Government back in 2024 around how to do that.

Chair

I suppose my question is, why are we not further advanced with it? You said this was something that happened before NESO came into existence, which was more than two years ago. When you were describing it, you also said that you recognise this is technologically feasible. It goes to my previous question about whether NESO is using technology in as advanced a way as it could; that is what is being said to me. Is that a fair criticism?

Fintan Slye

I do not think it is NESO’s use or lack thereof of technology that is impeding the rollout, or the adoption and payment for flexibility in the commercial and industrial space that you are talking about. What we have not seen is the market arrangements developed to a point that makes it a commercially attractive proposition for that individual.

Chair

What needs to happen for those market arrangements be in place?

Fintan Slye

Government published, I think it was last year, the clean flexibility road map. This is a road map setting out across industry participants, the regulator, ourselves and the market facilitator, the things that need to be done across the different sections of the market to enable that flexibility to come on stream. All parties are working to try to progress that as quickly as possible.

Chair

When is that supposed to happen?

Fintan Slye

That is a road map of increasingly opening the market and getting rid of the multiplicity of barriers over time—

Chair

We do not have a timeline; we do not have dates on the different stages?

Fintan Slye

Sorry, there is a timeline within that; I do not have it a hand but we can absolutely share it with you. Apologies.

Chair

That will be helpful. Thank you.

Melanie Onn

Connections reform, strategic planning, control room activity, grid build out and policy advice are all things that fall underneath NESO responsibilities. Is that too much to do? Are there competing priorities within that?

Fintan Slye

As with anything in the energy space, there are competing parties and competing tensions. In fact, as we talked about earlier, the energy system is ultimately about how you balance those elements of the trilemma. It is a huge role and set of responsibilities that we have been given, and we have looked to scale the organisation very significantly since its inception in October 2024. We started with just over 1,000 people, we are nearly at 3,000 people now, so we are really scaling up the resources and the capabilities we have in the organisation across all dimensions. I accept it is a really broad remit, but one of the benefits that NESO brings is that you have all those elements within one organisation and therefore can see the trade-offs between them and take that whole system perspective, such that you can focus on getting the right answer for consumers and for the system.

Melanie Onn

You do not seem to be managing that very well in terms of the levels of expectation and delivery. You have admitted yourself that you knew about issues in the control room but failed to take action. You have said that there was lots of change happening in the organisation, yet you are used to working in large organisations. Would it be better if there was someone who was in a position to deal with this, or someone who has more experience with change management, if you are not able to take on board significant concerns that an investigation has revealed exposes deep cultural issues?

Fintan Slye

We take the findings of the Eversheds investigation incredibly seriously. The organisation has been on a journey since it was established at the end of 2024. We have grown the organisation significantly and have delivered some incredibly big and important things for the energy system and for the country over that period. What the report showed is that there are some areas where we need to focus and improve. As the chief executive, I absolutely take responsibility for making sure that we do that; that the organisation grows and that we build the capability within it to address those issues so that we can continue to deliver for society and the economy.

Melanie Onn

Do you think you are going to be in a position to aid in delivering clean power by 2030?

Fintan Slye

Absolutely. As I say, the organisation continues to deliver across the really broad remit that you outlined earlier.

Melanie Onn

Do you think 2030 is still achievable?

Fintan Slye

In terms of the achievability of 2030, when we first set out our advice to Government, the term we used was that it was a Herculean task. It requires all parts of the system to do things at a pace and in a way that has not been done previously, and that—

Melanie Onn

Well, we know that all parts of the system are not doing that because in your organisation bits of it have failed.

Fintan Slye

Our view remains that hitting 20230 is an incredibly challenging target. In terms of the pieces of the plan that we are responsible for, we are absolutely focused on making sure that we deliver those parts. However, it is an energy system wide, indeed economy wide, change. We do not hold or control all the levers necessary to hit 2030, but we are absolutely committed to working with industry partners, Government and the regulator to play our part and make sure our bits of it are delivered

Melanie Onn

What do you feel are the biggest risks to delivering clean power by 2030?

Fintan Slye

At the moment, it is infrastructure delivery. If you think about the scale of the transformation that Clean Power 2030 needs, on both the generation side and the network side, these are really big, hairy infrastructure projects. Delivering those within the timeline is probably the greatest: will the renewable generation come on stream, and will the network build be delivered in line with the expected timelines? Within that there are obviously a series of specific risks for each of those categories, but in a macro sense, I would say that infrastructure delivery is probably the biggest risk.

Chair

We welcome Catherine Fookes to the Committee for her first session.

Catherine Fookes

Thank you, Chair, and thank you to our witnesses for appearing for us today. Why do you think people blew the whistle if there was not a problem?

Fintan Slye

Reflecting on the report and what it said, it did not substantiate the four specific allegations. However, what it did find was that there was a set of other cultural issues within the organisation that we needed to look at, and we are completely committed to doing that. One of the reflections—as you would expect—that we looked at our whistleblowing and speak up policy to see if it was fit for purpose, and whether it had all the elements in it that it should for an organisation such as us ours. My reflection is that while it does, and it did, we need to go further as an organisation and be best in class at this. We need to ensure that we have a culture in the organisation that encourages people to use both the internal channels, and indeed the other external channels: for example, Ofgem has whistle-blowing facilities as well. We are also in the process of engaging with both the trade unions, which have really great examples of where this works well in other organisations, and with external experts to make sure that our policy is not just what it needs to be but that we actually have the right culture. We want people’s lived experience in the organisation to be that they feel free to raise things, whether that is within their teams or anonymously. One of the things I did take some comfort from in the report—I put my hands up and acknowledge there was difficult reading in there—was that people actually felt quite comfortable raising issues with their managers and within their teams. But we were not really good at all at providing a feedback loop to say to them, “This is what we have done with your concern.” You may have raised a concern and a team somewhere else in the organisation would have dealt with it, but we were not as good as we should have been at closing the feedback loop so those individuals who raised it could see how it was resolved.

Catherine Fookes

Even so, those people obviously raised concerns in your organisation and felt they were not being dealt and therefore they had to whistleblow. What are you actually doing to instil a culture where next time we have an issue, like we did in June 2026, you ensure that people do not have to go outside the organisation, but that you deal with their concerns and that the culture of honesty within the organisation actually changes and delivers?

Fintan Slye

That is a programme of work that we are setting out to do, to absolutely make sure that we have that in place and that we have a best-in-class, best practice approach.

Catherine Fookes

What changes have you already made to make that happen?

Fintan Slye

Very specifically in terms of the things that we have done, we have set up an engineering forum run by our chief engineer. This provides a place where any concerns from the operational teams or control room teams can be raised. Those things are then explicitly triaged and dealt with, with a feedback loop back to that individual. That is one very specific thing that we have done. We have also established a new operability committee at the highest level of the executive team, which includes senior managers as well. That enables any of those issues that are coming up through the organisation to be dealt with in a very explicit way at the highest level, making sure those concerns are addressed to the extent they need to be. It is cross-functional to ensure we join up all the bits of the business, and that committee will provide updates on a regular basis into the board, to make sure that we have closed those issues off. As I say, one of the issues was that this feedback loop was not there, so we have done that. We are also talking to the organisation in a really open way about this, trying to engage both individuals and cohorts of teams across the organisation. We are looking to engage with the trade unions to get their advice and input on how to do this. We are trying to move on multiple fronts to address this and to do it in a really open way with the organisation and our people.

Kayte O’Neill

The big thing for me is that we recognise that trust with our colleagues is crucial. One of the things for me from the report is that if there is a single individual in the organisation who feels that they do not trust that we will take their concern seriously, then that is one too many. The proof will be in the pudding. They need to see us behave differently and they need to see that change flow through. Hopefully, we will have that trust that we already have in vast ways across the organisation. Again, for any individual to have to go outside and use a whistle blowing channel because they felt they were not being listened to is one too many, so we need to address that.

Catherine Fookes

How are you dealing with the high levels of operational stress that the report found your colleagues in the control room were going through?

Kayte O’Neill

Again, this is something we take really seriously. The control room teams are very well trained. It is an environment where they thrive and where they do the amazing work that they are there to do. However, they are very open in talking to us about where that feels challenging and where they are looking to us to provide support. We have some really practical measures on the ground: for example, if they come off shift and feel like they need to talk to someone, or even vent about what it is like to operate the system in sometimes very challenging circumstances, they have the opportunity to do that. We also have really good team structures and a great leadership team in and around the control room, who are continually having that dialogue with colleagues, ensuring they get the support they need. The forums that Fintan mentioned will allow us to identify where they think there are specific things we can do to help. A good example of that is that we know that a lack of system visibility can make its operation very challenging. They talked to us about that and we are now looking at how to provide better visibility and better situational awareness in the control room as a direct outcome of having those really open conversations.

Chair

What I do not understand from listening to your answers, is why it took a whistleblower and an independent review for you to recognise these cultural problems.

Fintan Slye

There was already a huge amount of work under way to address those issues. The review, because of its nature and being a public report, put a very fine point on it. We are a relatively young organisation that has been growing significantly, and where there were cultural issues, we were looking to proactively address them through all this. Obviously having those very specific seven recommendations in the report, which the board have accepted in full, provides a focus for delivering on them.

Chair

You are not the first large organisation to face cultural issues, but the safety-critical nature of your organisation puts it on a different level. You described the process, but there is a very big difference between people in theory being able to engage with senior managers to raise any concerns and, in practice, having the confidence and—Kayte used the word trust, which is a really important word—trusting that they will be listened to, and not just listened to but respected and not suffer adverse consequences as a result. How are you making sure that this is a success?

Fintan Slye

We are acutely conscious of exactly the things that you say because it is the lived experience of colleagues that matters. The set of processes are important and necessary, but not sufficient on their own. We need to ensure that people feel heard. As I say, one of the key things that came through from the report was that the people interviewed indicated they were relatively comfortable raising concerns with their managers. What they felt was missing was that the feedback loop was not closed. That will have a knock-on consequence. The next time they may not raise an issue at all if they feel it was not heard or acted on: even if it was somewhere in the organisation but we had not closed that feedback loop. Therefore, we are looking to put in those behavioural changes at an executive level to improve how we engage with the teams, but also those processes to ensure those feedback loops are really clear and closed.

Chair

You have talked about your executive-level engagement a few times now; does this mean that you and your executive team are going to be directly talking to engineers and people at all levels of the organisation to build those relationships, and to demonstrate by leading that is the culture change you want?

Fintan Slye

Absolutely, we will be out there doing exactly that. It is something I do all the time: I go into the control room to talk to the teams and it is something we do around the organisation. However, it is clear we need to do more of that and be better at it. When things come up in those conversations, we need to ensure there is actually a follow-through and response back to the individual who raised it. That is really important and those are the things that will change the culture of the organisation and indeed the lived experience of the people who work for us.

Graeme Downie

Just to pick up on that point; when did you first become aware that there was a disconnect between the senior leadership team and the control room?

Fintan Slye

I suppose when I read the report it—

Graeme Downie

Sorry; before you read the report you did not believe there was a disconnect between the senior leadership team and the control room?

Fintan Slye

Not articulated in as stark a set of terms as was in the report when it was published. As chief executive, when you read a report like that, you are very thoughtful about what it says—

Graeme Downie

Given that you have been in post for two years and you just told the Chair that you are speaking to these people all the time, you have all these processes in place, do you not feel that in that two years you should have been aware of that disconnect between the control room and senior leadership team?

Fintan Slye

Throughout the past two years we have worked really hard across all our operational teams, the control room and the wider organisation to make sure staff feel they have a voice and feel connected with the organisation. We do extensive staff engagement surveys, we do—

Graeme Downie

None of that showed up to you, as the chief executive, that there was a disconnect? It was only the report that has highlighted the severity of that to you?

Fintan Slye

The report brought home the severity of that in a way that caused me to reflect and to look at what I and the leadership team can do to address that.

Graeme Downie

What reflections did that lead to? Was it perhaps that the steps you had been taking for the initial two years were not working in terms of identifying that disconnect?

Fintan Slye

Some of the things we are putting in place—such as the engagement with the control room teams that the Chair mentioned—had actually begun before this report came out. For example, the engineering forum, which is chaired by our chief engineer, was specifically designed to enable people to raise concerns and/or opportunities. It is not just the risks, it is also, “We think this new tool would allow us to do something in a different way.”

Graeme Downie

When was that put in place?

Fintan Slye

That was put in place earlier this year, so before the report came out.

Graeme Downie

Presumably you would say that measure would not have had time to be reflected, to pull through before the report was published?

Fintan Slye

No, and we are continuously looking at how we can improve engagement with colleagues right across the organisation. How can we do a better job of ensuring that the brilliant people we have can do the great work that they need to do? As chief exec, looking at how we can do that better is a continuous job and a continuous role.

Graeme Downie

Again, going back to your two years of not realising that this level of disconnect existed. What gives you confidence that you are not missing other issues, despite having put in all these measures and continuous improvement over the last two years?

Fintan Slye

We have the report and its findings, so that is a set of actions and recommendations that we will now take forward and deal with. As I say, we do extensive surveying of our staff on an anonymous basis that allows them to provide feedback to the executive team and provide their perspectives on the organisation—

Graeme Downie

Well, clearly, they have not been effective up to the point of the report.

Fintan Slye

The report identified a specific issue of a disconnect between the control room teams and executive management. The control room is a really specific environment given it is shift work, day-to-day and minute-to-minute operational tasks that are incredibly complex. I have such high regard for the brilliant people in there and the job they do. However, due to the shift patterns and the nature of the work it is a different form of engagement and you need to ensure you bring them in.

Graeme Downie

Is it not eerily obvious from the last two years that it is a critical part of the organisation that has to be engaged with differently? Yet it does not sound like that was something that was happening as much as it should have been.

Fintan Slye

What the report has shown is that a disconnect developed, and that is something that we are now working very actively and are very seized of the need to address.

Graeme Downie

Briefly looking forward, you mentioned in your opening remarks and responses to questions from my colleagues this upscaling of the organisation. How are you making sure that, during that upscaling, you are not embedding the difficulties that you have faced up to now and that have been highlighted by the report?

Fintan Slye

We think very carefully about the culture of the organisation that we want to have, and the values we already hold. One of our plans is to do a broader cultural diagnostic across the whole organisation.

Graeme Downie

What is a cultural diagnostic?

Fintan Slye

It is to, apologies—

Graeme Downie

My concern here is that having worked with many corporate organisations that use phrases such as corporate diagnostic, most teams will think, “What the hell is that?” Then switch off immediately. Can I suggest that, when engaging with the workforce, those kinds of terms perhaps point to a cultural problem rather than trying to solve it?

Fintan Slye

That is an absolutely fair point, and point taken. Maybe to take a step back then and say, the culture of the organisation is really important and as an executive and indeed as the board, we are acutely conscious of that. We are a growing organisation and in doing that we need to ensure we instil the culture that we want. This is an organisation that has transitioned from being a subsidiary of a FTSE 20 large private sector organisation, to being a standalone public corporation. That is quite different and is something we actively talk to our teams and our staff around; what the different expectations are of leadership, openness, transparency and delivery within this type of organisation. That is an ongoing and continuous conversation across the organisation.

Chair

Before I go to Torcuil Crichton, I am going to ask you this: are you the right person to take the organisation forward?

Fintan Slye

I believe I am, Chair. I am absolutely committed to the organisation and its mission. It is an absolutely phenomenal group of people who do a phenomenal job delivering for the country, society and the economy. It is obviously very hard as chief executive when you read a report such as the one published. The helpful thing is that it pointed to the things that need to be done and I am completely committed to ensuring those things are delivered and that the organisation becomes the great organisation it can and should be.

Torcuil Crichton

Thank you, Chair, you stole my thunder slightly. Thank you both for coming in. I know this is difficult, Fintan, but I am a journalist and I like whistleblowers: they tend to speak truth unto power. The picture they present in newspaper reports is quite different from the one you have presented to us today. They say that the safe to say programme, to allow staff to raise concerns, is a running joke and they say that people get beaten down if they are not acquiescent or they do not comply with what management think. Do you think you have the confidence of your staff?

Fintan Slye

I believe I do. It is always difficult, and it is a major disappointment to me that there is any individual or team within the organisation who does not feel that they can speak truth to power or have their voice heard. However, when I look across the organisation and the feedback that we get through both informal channels, one-to-ones, through teamwork that we do, and anonymous staff surveys where people have the opportunity to speak up, we do not see the same story replicated as outlined in some media reports. We do not see it reflected in staff data around turnover and so on. I believe that I have their confidence, however, there is a huge challenge ahead for the organisation to deliver on what is a really important mission. As Kayte said earlier, one person who feels that they have to go outside the organisation to be heard is one person too many, and we are absolutely committed to improving in that space.

Torcuil Crichton

I get that. Kayte, do you get it? This is critical safety stuff, keeping the lights on stuff, and we need everybody going this way, not that way. How are you going to turn that around?

Kayte O’Neill

As I said, for me, trust is key. Alignment around NESO’s purpose mission, the thing we are here to do for GB—we have that in in spades in the organisation. When I talk to colleagues in the business about why they work for NESO, it is because they know it is an organisation where they can have impact; they are doing work that really matters and they are hugely proud of doing that work. It is absolutely on us to make sure that people feel that they can be really honest and really open when they are thinking about the challenges that face us today and will face us as an organisation going forward, and that they believe that as they surface those things, we will listen, we will act, we will follow up and we will always be there—

Torcuil Crichton

We need you to make it work. We rely on you. How are you going to do it?

Kayte O’Neill

We take it really seriously. We have talked about the recommendations in the report, we have talked about our commitment to following up on them. One of the things that is very clear to me is they will hold the organisation to account if they do not feel that we are acting appropriately and they will call us out. I am delighted about that. That is really important. We are going to be completely transparent with the plans that we put in place. We have kicked off our thinking, but we are out in the organisation today talking to colleagues and asking them: do these plans resonate? Do they make sense? Do you feel like it will make the difference?

Torcuil Crichton

Do you both speak to trade unions?

Kayte O’Neill

Yes, we do, and we have—

Torcuil Crichton

When was the last time, Kayte?

Kayte O’Neill

I spoke to the trade unions the day before the report was published. I have been talking to them over the summer about some themes that we are seeing coming through in the organisation. We are very privileged to have a good positive engagement and relationship with unions; they hold us to account. They feel like they can challenge us and I hope that they would say that they see us respond.

Mike Reader

The organisation sitting between households in the UK experiencing power cuts and blackouts this winter has a toxic culture, has a leadership that did not know it had a toxic culture, and has repeatedly missed critical deadlines it has to meet. Kayte, how can people be assured their lights will not go off this winter?

Kayte O’Neill

The security resilience of the system is our number one priority; it has always been our number one priority, and it continues to be. As an organisation, we have a very broad mandate that allows us to see what it takes to keep the lights on today through to what it will take to keep the lights on way out into the future. Teams spend all day every day across the organisation focused on that challenge.

Mike Reader

In a leaked meeting in The Times, you made it clear your priority was connections not security. Is Kayte right there?

Fintan Slye

She is right. I do not have the transcript of the meeting in front of me that The Times quoted, or whether that was out of context, but NESO’s mandate around security of supplies is crystal clear.

Mike Reader

What is more important, meeting CP2030 or keeping the lights on?

Fintan Slye

Keeping the lights on.

Mike Reader

I will come back to grid connections in a second because if you have prepared for this session you will know that is my focus area, but I want to talk about remuneration. Could you confirm you are both salaried employees working directly for NESO?

Fintan Slye

Yes.

Mike Reader

Are your salaries made public?

Fintan Slye

Yes.

Mike Reader

Could you confirm what those are?

Fintan Slye

My salary is reported in the annual reports and accounts, subject to the review by the remuneration committee, and my base salary is £309,000.

Kayte O’Neill

Similar to Fintan’s, mine is reported and publicly available. Our total comp is published. My salary is just below that, high £200,000.

Mike Reader

Do you have a bonus structure?

Fintan Slye

Yes.

Kayte O’Neill

We do.

Mike Reader

How is that bonus calculated?

Fintan Slye

Bonus is calculated by the independent remuneration committee of the board in line with an agreed remuneration policy that is published and approved by the regulator.

Mike Reader

Is it discretionary or is it based on a series of metrics?

Fintan Slye

It is based on a series of metrics. The metrics are published in the annual report. The remuneration committee’s assessment of those metrics is published, and the outcome of those are published.

Mike Reader

What are those metrics, for the benefit the Committee?

Fintan Slye

They are set out in the company’s annual report and they reflect the strategic objectives of the company.

Mike Reader

Does the culture of the organisation feature in those metrics?

Fintan Slye

There are metrics around people, and the remuneration committee will obviously take into account the culture of the organisation as it reflects upon the overall outcome of the bonus, as you would expect it to.

Mike Reader

Given the culture, staff satisfaction, and obviously the issues raised in the Eversheds’ report, do you therefore think your remuneration was fair given the failings that have been found in the organisation?

Fintan Slye

The remuneration committee, the board, have not yet determined outcomes for the last year. They will and I am sure that they will take an objective, transparent view about overall performance of the business and performance against the objectives in coming to a conclusion.

Mike Reader

Do both of you think, based on the performance and scale of the organisation, that your remuneration is fair and reasonable?

Fintan Slye

The remuneration, as I said, is set by an independent remuneration committee of the board, and it benchmarks the salary in the package against—

Mike Reader

Do you think it is fair?

Fintan Slye

Yes, I do.

Kayte O’Neill

Yes, I trust in the processes that the remuneration committee will operate in.

Mike Reader

Having been measured on culture and performance of the business, a business that has been found to have a problem with culture and that completely missed deadlines, are you happy that the way you have been remunerated is reflective of the performance of the organisation?

Fintan Slye

As I say, the remuneration committee, the board, has not taken a decision on—

Mike Reader

It would have done in previous years, and I am asking about your position, not what the remuneration board asks.

Fintan Slye

If I reflect back on the last year, for example, for which the independent regulator provided a view on the performance of the organisation, it said it met its expectations. That is one metric that you can use. As you point out, there are various others, including staff satisfaction and engagement where typically we score above the industry norm. Obviously, the recent Eversheds’ report has pointed to a number of issues where we need to make improvements, and I trust in the objectivity and transparency of the remuneration committee that it will take those things properly into account as it reflects on it.

Kayte O’Neill

Yes, I would not change anything that Fintan has said.

Mike Reader

Kayte, as the chief operating officer, do you feel you have all the tools you need now to deliver the changes that need to happen?

Kayte O’Neill

Yes, I do. We have a very broad mandate as a team, everything from operating the electricity system, keeping the lights on in real time, all the way through to planning the system out to 2050. We spend a lot of time as a team, as an organisation, thinking about what it will take to deliver across that suite of priorities, and I believe we have what we need to be successful.

Mike Reader

I will come on to connections and grid reform. We are now on the second extension for getting to phase 1 offers; 31 October. Kayte, are we going to see any more extensions? Are those remaining tricky 10% ones all going to be done in three days’ time?

Kayte O’Neill

We are working with every individual customer still waiting for their phase 1 offer, so we are on track to hit those deadlines. As you say, those tails of offers still to go out are the extremely complex ones where we are working very closely with the customer to make right.

Mike Reader

Will they all be done by Friday?

Kayte O’Neill

If the customer is ready to receive the offer—that is, if the customer feels that we have given them everything they need to be confident that they can accept that offer—then it is ready to be done. Some conversations with a single digit number of customers are still going on this week.

Mike Reader

You may not hit that 100% target by Friday.

Kayte O’Neill

No, but it will not be because of the process, it will be because some of these projects are the really big complex ones that are very important to the energy system. It is very important that we get them right so that the customer can accept that offer and we can move forward.

Mike Reader

When you missed deadlines last time it was blamed on National Grid’s design and engineering. Fintan, you said earlier that you do not have all the levers you need to pull to deliver Clean Power 2030 and this stuff. What conversations have you had with Government about giving you all those levers to make sure you can get these things done?

Fintan Slye

Referring back to earlier, for Clean Power 2030 NESO will never have and should not have all those levers. It is delivery on the ground of big-ticket infrastructure delivered by the transmission owners and DNOs. You also have the generation companies delivering their individual projects and, alongside that, you have issues such as planning reform, which the Government are engaged in. It is a multifaceted programme to get to 2030, and I do not think that NESO can or should have all the levers necessary to do that.

Mike Reader

Coming back to these current offers, when National Grid’s design was to be in your critical path, at what point did you become aware there were problems?

Kayte O’Neill

We are in continuous, and I really mean continuous, daily engagement across the network companies, NESO, the Ofgem teams on connection, and the DESNZ teams on the ways of working on connections reform. Once we had the full queue published, we started to understand the scale of what was ahead of us collectively and to get offers out for those projects. We completed the issuing of protected offers and, as we were coming in to close on those, we started work on the phase 1 offers. That was when we started to understand how much more needed to be built—all the batteries and projects that had successfully come into the queue with their protections and the additional demand we had seen in the queue. There is a huge amount to be connected in phase 1 that required a level of re-study, and we have worked really closely with the network companies.

Mike Reader

Do you think you underestimated the volume of work needed?

Kayte O’Neill

We possibly had underestimated how much re-studying work would be done. It was only when we saw the volume of stuff meeting the protection clauses, and therefore coming into the queue, that we fully realised. We knew it was a risk. It really crystallised as a risk once we had full visibility of the new pipeline and we were translating that into what it meant for the network build out to accommodate it.

Mike Reader

What measures have you put in place to avoid this happening again?

Kayte O’Neill

We have fundamentally changed our ways of working. Historically, in the very early phases of connections reform, we had been working in less of a collaborative ongoing way. We have really brought that together. We have also implemented what I would refer to in operational terms as command style governance. We are meeting twice a week at an executive level, where we really hammer out the challenges. We have the decision makers in the room. We take decisions. We move the programme forward, and then we meet, again at the executive level, with DESNZ and Ofgem fortnightly. We now have a very fast route of people who are sufficiently in the detail to be decision makers, on anything that needs escalating because it is a policy question, to take decisions and move the programme forward. Those have been fundamental.

Mike Reader

That all sounds very positive. Can you assure us that in future connection offers and so on we will not see further delays?

Kayte O’Neill

We have been really transparent that phase 2 is also going to be difficult. There is still a huge amount to be connected in phase 2 and we are in active discussions with industry.

Mike Reader

I do not know what the deadline is for hitting your phase 2 offers.

Kayte O’Neill

It goes out into the early part of next year, so when you take transmission and distribution into account.

Mike Reader

It is Q1 of 2027; when in Q1 of 2027?

Kayte O’Neill

At the end of March.

Mike Reader

The end of March? What is your confidence level on that date?

Kayte O’Neill

I would not want to knee-jerk into giving a confidence level right now; there are some difficult challenges that—

Mike Reader

You are on a twice weekly drumbeat of meetings; you must have a confidence level in whatever dashboard you are using.

Kayte O’Neill

Yes. We are working really hard to get to one, and the best way to get to one is to understand every single offer that needs to be issued, what type of studying is required, the order in which you can do them, and the complexities you are going to find. I am confident that we have made really significant improvements to our processes, so the processes themselves are more slick. We previously had errors that we are now managing to remove. We are doing everything we can from a process perspective. I would be uncomfortable in giving you a probability number without us having fully yet understood the queue, but we are actively doing that work.

Mike Reader

You should have a probability position as a basic rule of your project controls, even if it is P20, P30, wherever it is going to be. You should have a probability of how likely you are to meet that deadline; that is a fundamental of running a programme.

Kayte O’Neill

Yes, we do. You are absolutely right, it is fundamental. Those are exactly the terms in which we think, but while we are so actively trying to unpack in real time, right now these are conversations that are happening in the organisation.

Mike Reader

We have talked a little about engineers; how many qualified planners and project controls professionals work at NESO?

Kayte O’Neill

I believe 400-plus.

Fintan Slye

How many qualified engineers work in NESO?

Mike Reader

Planners and project controls professionals.

Fintan Slye

I do not have a number.

Mike Reader

Could you write back to us?

Kayte O’Neill

Yes, we certainly could. Yes.

Bradley Thomas

After the grid performance fell below normal operating limits on 23 June, and given the Eversheds’ report and the cultural issues, what is your assessment on the scale of the disconnect between management and operators in the control room, given that they are fundamentally quite different functions within the organisation?

Fintan Slye

In respect of 23 June, the control room did a phenomenal job managing what was a really difficult set of circumstances. You can see from the interim Ofgem report the number of different things that were happening on the system and the scale of the challenge they had to manage. They did a terrific job doing that. We have continued to support the investigation into it and given the nature of that extreme event, which went on for a week with repeated red weather warnings, there will be learnings for the energy industry and for us to make it more resilient going into the future. In terms of a disconnect between executive management and control room teams, what was also clear on the day is that the control room teams had all the operational independence and decision-making that they needed and support from the executive for the decisions that they took. When we take a step back to the broader conversations we had earlier between the executive leadership and the control room, it is something we are reflecting on. How do we improve that? Forums, such as the ones we have established, are ways we can ensure that, to the extent people have concerns, issues, or ideas that they want brought forward, there is a really clear path to do that. As we have said, it is also about the lived experience of those colleagues and making sure that, in addition to the process being there, they feel that they should use them and will be heard if they do use them.

Bradley Thomas

Given that, do you think senior executives understand the reality of the pressure that is faced by those in the control room who are tasked with keeping the lights on, day in day out?

Fintan Slye

We do. I am not sure we have communicated that back to the control room sufficiently but the conversations we have, and the issues we look at, are how the system is getting more complex and challenging. What are the driving factors within that? The system undoubtedly is getting more complex to operate, so what are the tools, resources, and capabilities we need to make sure that those teams, inside and outside the control room, have? It arrives in the minute in the control room, and their ability to do their job is hugely influenced by the jobs done by all the teams who set up the day in advance, the outages that are in play, and so on. We spend a lot of time making sure that we understand what the tools, processes, capability bills, shift patterns, shift resource numbers—

Bradley Thomas

So that I can understand that, by way of an example, how many days per year might each of your executive team spend in the control room, so that they have a really close affinity with the pressure that they are facing and to develop your understanding of the job and obligation that they have to reduce that detachment, the size of that gulf, between the control room and executives? How many days per year would you spend in the control room?

Fintan Slye

I am based in Wokingham where the control room is, and I try to drop in as much as I can to the control room, talk to the power system managers, the person who is managing it on the day, to see how it is. We also have different engagement forums, but Kayte would spend more time in the control room. Craig, who is our director of system operations, spends even more time in the control room. We did a process a while ago where we went in and did a portion of a night shift because how the control room experiences that is really different as well. We also operate across two sites and there is a different dynamic in both sites; the teams’ set-up is different. We have gone and done that. We are conscious of that. If I reflect on the report, I probably need to do more. For me as chief executive, as an individual, and as a leader, the report made uncomfortable reading and made me want to lean in more and understand more from those individuals and teams across the control room and the wider operational teams that support them.

Bradley Thomas

Given the event in June, this dropping below normal operating limits, what is your confidence level for winter? What would we need to see in order for NESO to call a stress event?

Fintan Slye

In regard to our confidence for this winter, we believe that margins and security of supply are broadly in line with previous years. When we look at margins we look at operational patterns through the year; we are not flagging any increased levels of risk this winter. The control room absolutely knows when it needs to issue warnings, and you have seen it do that when the surplus is not as much as it would like to see. At the start of the day if, when the team look to the peak, the position of the market as notified is closer than they would like or that they feel they need in order to manage the system, they will issue an electricity margin notice. We will issue them based on the operational realities that the control room faces. It is what we have done, will do, and will continue to do. We see that there is an increasing desire for even more transparency and explanation behind that, which may point back to an earlier conversation when the Chair raised queries about explaining some things. There was a time when the issue of a market notice would go unnoticed in the wider public, but there is a huge interest in these things. We are also looking at how we provide the wider information and context around what is happening on the system. The control room and leaders in the control room will take the required operational decisions based on the operational reality that they face. We are crystal clear that that is the only thing that should matter to them.

Bradley Thomas

On the remuneration point, given that you are chief executive of NESO responsible for the overall performance and the culture within the organisation, and given the cultural failings reported in the Eversheds’ report, in 2024-25 your package was almost £1 million including a sizable bonus. Given the failings of NESO this year, regardless of what the committee recommends, will you decline a bonus for this year given the performance of NESO?

Fintan Slye

I trust in the process of the remuneration committee.

Bradley Thomas

In your personal view, do you think you should decline a bonus this year given the performance of NESO?

Fintan Slye

The performance of NESO and my performance should be looked at over the full suite of things that we have delivered. As I have said, one of the metrics that I can point to is that the regulatory assessment of NESO’s delivery was that we met expectations for the particular year that you are talking about.

Bradley Thomas

If a bonus is offered, do you plan to accept it?

Fintan Slye

I trust in the impartiality, the fairness, and the processes of the independent remuneration committee of the board.

Lizzi Collinge

We have talked quite a lot about the day-to-day stress that the control room is under, and the Eversheds’ report looked at that day-to-day stress. Earlier you described the stress that the system is under due to the extreme heat of this summer. You may have used the word unprecedented; I am not sure. What the Eversheds’ report also identified is that your staff know this is much more likely to be the new normal. Going forward, a summer like we have just seen, given climate change, is much more likely than it used to be. The report identified high levels of stress and concern within NESO about the longer term picture as well, not simply these extremes. What are you going to do to give your staff confidence that in the long term they will be able to deliver their roles and be able to keep the lights on?

Kayte O’Neill

We spend a lot of time with the organisation talking about how the nature of the energy system is changing and how that changes what is required of our teams in the control room day in day out. We can point to areas where it is becoming more challenging in real time to operate the system. Sometimes we talk about the volume of actions that have to be taken in the control room. To paint a picture for you, we used to take maybe 35,000 actions a year; now we can take 15,000 actions a day. That gives you a sense of the volume of what our teams are dealing with. We spend a good amount of time trying to understand that and prepare and plan for it. The good news is that technology, market innovation, everybody else in the energy system who is trying to solve some long-term challenges, are all making great progress in how we can ensure that we mitigate any future risks, manage down those levels of challenge, manage—

Lizzi Collinge

Do you have confidence that the rest of the system will meet the challenge?

Kayte O’Neill

I have confidence. We have seen incredible progress over the last five or six years. When we established the Electricity System Operator as a ring-fenced part of the National Grid back in 2019 we first started to talk, over a number of years, about what it would take to be able to operate a clean power system, a very renewable-driven power system. We have seen incredible innovation in the six or seven years since then to solve those challenges such that today, and for a period this year, we have operated the system—

Lizzi Collinge

What are the risks going forward? Have you identified any new or imminent risks to your operations?

Kayte O’Neill

We have been talking publicly about seven big operability challenges for a really long time. We publish an annual operability strategy report that explores those risks and talks about what NESO needs to do but also what market needs to do and where we need to see regulatory or policy changes to mitigate and manage those risks.

Lizzi Collinge

Can you name some of those risks?

Kayte O’Neill

A good example would be as you take off. We have seen a decline in big thermal fossil-fuelled generation on the system as we have seen renewables come in. One of the characteristics of a fossil fuel-based system is inertia, and we have had to find innovative ways to replace that inertia in the system. We saw the market respond brilliantly well to that, both in terms of the technology solutions they could provide but also the market tools that we would use to procure that service.

Lizzi Collinge

You have taken me quite nicely on to my next area of interest, which is the road to Clean Power 2030. You have previously talked about two pathways: the new dispatch pathway that focuses more on carbon capture and bit less on offshore wind, and depends on shorter duration energy storage versus a further flex and renewables pathway that focuses more on offshore wind, flexibility on the demand side, and longer duration energy storage. You have said to us previously that it is not one or the other. I would suggest then that pathway is probably not the best metaphor because, by definition, you choose one or the other. Are you clearer now than you were when you came a couple of years ago as to where the focus will be on that Clean Power 2030 pathway? Will the system be focusing more on carbon capture and storage, or will it be focusing more on the further flex and renewables pathway? Are you clear about where we are at, where we are going, and how that impacts your organisation?

Kayte O’Neill

Where clarity starts to emerge for us is the projects that actually hold a connection offer to connect to the system. We now have a picture of everything in the current queue that is likely to connect. Of course, there remain policy choices for Government that will inform to what extent we end up deploying more of those technologies, such as CCS or hydrogen, to power. Those are policy decisions, to the extent those decisions are taken, and then they flow through. We would ultimately see that show up in a connection to the system.

Lizzi Collinge

You noted that the new dispatch pathway would leave Britain more exposed to volatile international gas prices because gas would still be used 47% of the time. I do not have a time frame for that stat though. Do you have a view as to which is the best pathway? Is there a pathway that makes it easier or harder for your organisation to manage?

Kayte O’Neill

I do not think there is an easier or a harder way; as we have talked about, there is a level of flexibility in both pathways. There is a set of operational challenges that we already think about and will solve in either pathway, irrespective of what connects to the system. I am confident that whatever the trajectory, with time and focus we will be able to continue to operate a secure and resilient system. That was a big test in putting together the Clean Power 2030 advice that we proposed to Government and ultimately their action plan. Everything that went into our advice had been tested for a resilience, secure, and operable system.

Chair

I am briefly going to step out of the room while Melanie Onn takes over as Chair. [Melanie Onn took the Chair.]

Chair

Torcuil Crichton, very briefly please?

Torcuil Crichton

Thank you, new Chair. A quick question on community connections, which do not seem to be a priority at all because no new community schemes will get into the queue as the queue stands just now. This Committee has recommended that NESO should not be agnostic about community connections because they are the best way of getting neighbourhoods that are going to be next to this huge infrastructure to benefit from it. Have you taken a view on prioritising community connections?

Fintan Slye

It is not for us to decide to prioritise one type of connection based on ownership structure over another; that is a Government policy decision, if they want that to happen. Notwithstanding that, I recognise everything you said around the benefit of community schemes and their ability to get communities more engaged in the energy transition, potentially understand better, and be more accepting of energy infrastructure and the benefits it can bring. Those things are true, and because of that we are looking to see other things, but we cannot prioritise community energy connections over other—

Torcuil Crichton

Why can you not do that?

Fintan Slye

We have an obligation to act in a non-discriminatory way and it would be for Government to set a policy in the first instance.

Torcuil Crichton

You are the Pope, and they’re God. You cannot do it.

Fintan Slye

We cannot within the policy framework that exists. It would require Government to take a policy decision that we should do that.

Torcuil Crichton

A Minister would have to direct you?

Fintan Slye

Yes, would have to take up the policy.

Wera Hobhouse

There is a lot in there that I would like to follow up but I am following what I have prepared as a question. You said earlier that a lot of the cultural difficulties that you have within the organisation are ultimately because three crises collide. We have climate, energy, and affordability crises. You have to balance all that out as an organisation. You had to take quite a lot of heat in questioning from us and for you this is an opportunity to maybe turn that around a little and tell us whether you think the Government have effectively supported policies towards Clean Power 2030. Do you feel that you have been left to hold the baby? There are the political pressures of Clean Power 2030, and on top of that all the global pressures that we have on energy and affordability. Do you feel supported enough by the Government?

Fintan Slye

We do not feel that we are holding the Clean Power 2030 baby. That is a Government policy that they have set out and they own. We play an important part in enabling bits of that to deliver but, as I set out earlier, there are many other parts of industry, Government, regulator and so on, that need to do things in order to deliver clean power by 2030. One key thing for us is how we make sure that we keep the lights on today. We talked a bit about that, and making sure it is secure. In the long term, it is how you think about designing an energy system that works for Great Britain, thinking through the infrastructure that is needed and the impact that that will have on communities, how you think about the affordability of building out anything that you want to do, and reliance on imported fossil fuels. The strategic spatial energy plan and the regional energy strategic plan are the mechanisms through which we can work with Government to help inform Government around some policy choices that they need to make. In transforming an energy system, you have all those things at play. We are seeing in real time the cost of energy really high up the agenda, if not at the top of the agenda from a public point of view, and tackling that has to be an absolute priority.

Wera Hobhouse

Do you therefore think that net zero Clean Power 2030 will ultimately lose its ranking in the priority?

Fintan Slye

Maybe in the narrative, but when we looked at Clean Power 2030 and gave advice to Government, one thing we looked at was, on a system-wide basis, whether it was more or less expensive than not going for that target. The answer at the time was that they were broadly equivalent in terms of total system costs in the 2030 target. One key thing that we reflect on is, at that time, the gas price was 100p/therm and indeed we faced some criticism for that being too high an assumption to have. Gas this morning was 217p/therm, with no prospect of it coming down any time soon. What Clean Power 2030, or a transition from imported gas and on to more homegrown generation, be that renewable or nuclear, provides Great Britain with more control over the input costs to its energy system. Therefore, I do not think the two are mutually exclusive but the overarching imperative at the moment is to address the affordability crisis.

Wera Hobhouse

Do you believe the Government have recognised that in their policies? We have just heard that some decisions are Government decisions. Prioritising community energy is ultimately a policy thing; therefore you are following policy decisions. Do you feel NESO gets that policy direction from the Government in the heat of the moment because a lot of things collide together?

Fintan Slye

We work really closely with both Government and Ofgem across a range of things. Kayte talked about the very close working, for example, on connection offers and that is fortnightly meetings with decision makers at DESNZ and Ofgem. On the longer term issues, such as the strategic spatial energy plan, we also work really closely with them. We have a really good relationship with them and feel that we have the ability to raise issues and input those into the policy debate. As far as government policymaking is concerned, from NESO’s perspective we adhere to government policy once it is decided.

Wera Hobhouse

We talked about flexibility and it is one of our big focuses. To make flexibility really work, is it a technical problem or is it a market regulation problem?

Kayte O’Neill

It is largely getting the market signal so the routes to market, the ability for that flexibility to be brought forward to be valued appropriately, and then to have access to the markets to extract that value. There are important co-ordination questions: how do you make those markets effective across the multiple players? There is a lot of focus on that with the flexibility commissioner, the market facilitator, and all organisations working to resolve some challenges. [Bill Esterson resumed the Chair]

Wera Hobhouse

Can we come back to the government policy point? When you talk about market signals, a lot of those are ultimately being set by Government. Do you think the Government do enough market signalling policy-wise in order to make that flexibility work properly?

Kayte O’Neill

There is a huge amount of work going on to reform national pricing that the Government are currently leading on. We look forward to that work delivering clarity and conclusions on market design going forward that will unlock things such as the value of flexibility but provide the right signals to all market participants.

Wera Hobhouse

Earlier you were put under pressure to propose timelines or deadlines on to your answers. Do you think there should be a timeline or a proper date for that to have happened or should happen?

Kayte O’Neill

It is always really helpful for industry to have clarity on when decisions will be taken. Undoubtedly, the complexity of market reform is impacting on the time taken to make decisions in this space. A huge amount of consultation has happened and is continuing to happen. From talking to Government, there is a real appetite to get this locked down and provide that certainty into the market.

Sir Christopher Chope

Mr Slye, are you responsible for scrutinising the costs of balancing the grid?

Fintan Slye

Are we responsible for scrutinising the costs of balancing the grid? We incur the costs that are paid for balancing the grid but, in many cases, they are the costs provided to us, for example, by generators to turn up or down their output. The scrutiny of those costs belong to Ofgem; those are market players and Ofgem regulates them.

Sir Christopher Chope

The NAO has said that you are; you have a role in scrutinising the costs. Do you accept that? The National Audit Office has said that you have such a role.

Fintan Slye

Yes.

Sir Christopher Chope

What is going to be the cost of balancing the grid in the current financial year?

Fintan Slye

In the current financial year, it will be about £3 billion.

Sir Christopher Chope

It will be £3 billion. What do you expect it to be in 2030?

Fintan Slye

Our estimate is about £8 billion in 2029-30.

Sir Christopher Chope

It will be £8 billion?

Fintan Slye

Yes, it comes down very significantly after that.

Sir Christopher Chope

Let us put this in context. Today the Chancellor of the Exchequer is going to make a big announcement about removing standing charges from gas bills. There are 23 million users of gas and they are going to have these standing charges removed. The cost calculated, just over £100 per year per user, is about £2.5 billion. The Chancellor is going to make a big thing about £2.5 billion being saved from bills for the coming year, or in 2027, and yet you are forecasting that between this year and 2030 there is going to be an increase of about £5 billion in the costs of balancing the grid, which are four square put upon the consumer, are they not, the user of the electricity?

Fintan Slye

Yes, and those numbers and projections are something that we have highlighted for a number of years now. We are absolutely committed to making sure that they are as low as possible. We recognise the costs today are a huge burden on consumers. You are absolutely correct; they flow through to bills. There are two things to note. One is that in the medium term, the thing that will get constraint and balancing costs down is the delivery of new network, and we are working with all the transmission companies, Government, and Ofgem to get network delivered as quickly as possible. That is the thing that ultimately brings those constraint costs down.

Sir Christopher Chope

These balancing costs are a stealth tax on consumers. They are contributing to the cost of living crisis. I was looking at the figures and, back in 2013-14, the balancing costs were only £1 billion. You are now complacently saying, “Well we may be able to limit it to about £8 billion by 2030.” This is unacceptable. Am I right in saying that, if we did not have this obsession with net zero and clean energy by 2030, these costs would be significantly reduced and in fact could be put back to the level that they were in 2013-14 and thereby save consumers in the order of £7 billion a year?

Fintan Slye

Firstly, to clarify, there is nothing complacent in how we view that level of costs and those levels of costs flowing through to consumers’ bills. We are absolutely doing everything we can to try to minimise those costs. They are the costs that arise due to the actions that are necessary to ensure security of supply in the control room. We have been flagging for a while now that they are due to rise. Some of that increase this year is down to the increase in the wholesale gas price because some actions we take are to turn up gas generation in parts of the country, and if that is significantly more expensive then that flows through to balancing costs. Notwithstanding that the key to getting constraint costs down—we share absolutely the concern about that level of cost—is the delivery of network infrastructure. In the short term, we are working with the transmission companies to maximise what can be got out of the assets that are already there using things such as dynamic line rating where, in real time, you can push more power through lines.

Sir Christopher Chope

When are we going to get these balancing costs back to where they were in 2013-14 of £1 billion a year?

Fintan Slye

They drop significantly in the very early 2030s. Our projections are that they drop significantly, and that is in line with the delivery programme by the network companies.

Sir Christopher Chope

To £1 billion a year?

Fintan Slye

Our projection is they come back down to £2 billion a year but I will have to come back to you on it. We publish an estimate of these. I will have to come back to you on the number but I think it is £2 billion.

Sir Christopher Chope

People complain about the cost of net zero policies and the insistence on the 2030 target for so-called clean electricity. What I am saying is that these constraint costs or balancing charges imposed upon the consumer are a direct consequence of that insane policy, are they not?

Fintan Slye

The biggest driver of the level of constraint costs is a mismatch in infrastructure and delivery times between generation and transmission, with the generation connecting before the transmission infrastructure can be built. We have seen transmission infrastructure take longer. It is also important to point out that constraint costs are not the sum total of the benefits or dis-benefits—let’s not use slang, the costs to consumers. When you connect this generation earlier, it actually displaces gas and brings down the wholesale price of electricity so the £8 billion is too much. It is too high. We are focused on getting it down but I would not want you to walk out of here with the impression that delivery of the renewable infrastructure early is just a cost. There is also a benefit to it that accrues to customers through lower wholesale prices.

Sir Christopher Chope

We have yet to see any reduction in electricity prices. Our electricity prices are the highest in Europe, if not in the developed world. When are we going to get electricity prices down to the same level as gas prices are at the moment?

Fintan Slye

Hopefully soon, but it is the very high gas price that is one of the key drivers of high electricity prices.

Sir Christopher Chope

Gas is still cheaper than electricity, is it not?

Fintan Slye

You have the spark gap, which is the difference between them, but high gas prices play an important role in feeding through to the high electricity price that we have. One of the benefits of a transition away from gas power generation to nuclear renewables and so on is that you are less reliant in your electricity system and therefore the price is less than the price of gas.

Sir Christopher Chope

There is a difference between nuclear, which is constant, and renewables, which are variable. What you have to do is use public money, taxpayers’ money, consumers’ money, in order to try to enable the grid coming from the electricity to accommodate surges in power from windmills and solar. If we did not invest so much in Chinese windmills and solar panels, the costs to you of balancing the system would be far lower, would they not?

Fintan Slye

Without going into the different origins of location of technology, it is really important that you have a diverse portfolio of generation. It provides greater resilience for the country as a whole to have a diverse portfolio. When looking at the costs that consumers face, we should absolutely factor in constraint costs and we should focus on getting them down, but we also need to look at the whole-system costs that consumers face, because consumers pay all the costs within our energy system. It is incumbent on us as NESO, on the energy industry, to make sure we are trying to get to the lowest cost system. One of the ways to think about it is we will never, and probably should never, get to a situation where constraint costs are zero. If you get to that point, you have probably overbuilt your network, such that never for one hour on one day is there a constraint. There is an optimal.

Sir Christopher Chope

All I am asking, on behalf of consumers, is for a reduction in these enormously high costs. There was a day earlier on this month when £47 million was spent in a day on balancing costs; that is a direct cost upon consumers of electricity. This is intolerable. You seem to not recognise the need to try to prevent these increases taking place. You are already three times what it was in 2013-14; you are projecting to go up another £5 billion a year beyond that. Why are you not taking immediate action to level that off so we do not go beyond say £3.5 billion a year? Limit it for the future.

Fintan Slye

The levers to do that are not within NESO’s control.

Sir Christopher Chope

Are they within the control of the Government?

Fintan Slye

They are a function of, as I said, the main driver of the constraint costs and driving them up to the numbers we talked about.

Sir Christopher Chope

I must finish but these are a direct consequence of misguided Government policy, are they not?

Fintan Slye

Constraint costs add to consumers’ bills. I would not want anyone to leave here with the impression that we were doing anything other than trying to minimise them, but it is important to recognise that constraint costs are one part of the set of costs that consumers pay. When you bring generation on, for example, ahead of the transmission infrastructure, that can give rise to constraint costs. It can also reduce the wholesale price of electricity. What I am saying is that we should all be focused, and we are focused, on trying to ensure that consumers’ bills are as low as possible. Energy prices are too high and we need to pull—to use your language—every lever that we have available to us to make sure that we are doing that. We are absolutely focused on trying to get constraint costs as low as they can be using the things that are within our control and, where they are outside our control, trying to use the influence that we have to do it.

Sir Christopher Chope

You will be judged on the results.

Fintan Slye

Always.

Claire Young

I would like to start with a very quick question to get a quick answer. You talked earlier about dropping in on the control room as a way to connect. Do you recognise that the boss dropping in could be perceived in different ways? If you have a seemingly toxic culture then it may not be perceived as a positive.

Fintan Slye

I suppose that is possible; to be honest, that is why I always ring the PSM before I walk into the control room, so I am not doing it unannounced. I say, “How are things going in the system? Is it all right if I drop in and have a quick chat?” I try to be as open and engaging as I can be with staff right across the business. For a control engineer in any part of the business, it can be intimidating if the CEO wanders over and says, “How are you doing today? What’s going on?” We are acutely conscious of that and I try to make sure that I do it in a really thoughtful way. I know it is a trivial example, but as I said, I call the PSM before I walk into the control room.

Claire Young

I am just wondering about your awareness of how you are coming across given what we have read in the press, but I will move on. I want to return to demand-side flexibility because it is illustrative of some issues. Businesses and consumers care about security, supply and cost. You said earlier that despite what had been reported in the press you believe keeping the lights on is the top priority. The clean flexibility road map is focused on the clean power target. Are you on track for the flexibility of 10 GW to 12 GW by 2030 that is needed to deliver that target? Is that also the right road map for maintaining energy security or are there conflicts there?

Kayte O’Neill

We can think about flexibility in two parts: demand-side flexibility and supply-side flexibility. We have already talked a bit this morning about demand-side flexibility, whether that is in consumers’ homes or businesses, and we are making really good progress in that space.

Claire Young

What evidence do you have that you are making good progress?

Kayte O’Neill

We set ourselves targets for the amount of flexibility that we would want to see coming through and at the moment we are meeting—in some cases exceeding—those targets. We have worked really hard with industry to put those targets in place and make them very transparent and industry is holding us to account to make progress. As Fintan said earlier, many parts of the Clean Power 2030 action plan required really significant change. Growth in flexibility was one and the supply-side flexibility is a really important part of that. It is largely going to be policy-driven as to where the different sources of flexibility come forward. That is not to say that in the meantime, if some big sources of flexibility do not come forward, we have an insecure or inoperable system. As we said we are confident that there is movement between the different pathways, and that if we have less flexibility we have to account for that elsewhere. When we were creating the clean power advice we started with, “What is the maximum flexibility we can get on the system?” That minimises what else you need. We take it very seriously in that sense.

Claire Young

Do you think you have all the levers that you need?

Kayte O’Neill

On the demand side, some things that we have already talked about continue to be important. We know from talking to the market that it still sees barriers to getting in. The deployment of smart metres has been a really big part of enabling customers to see what they are using, when they are using it and the value of flexing their demand for example. We continue to push on all those fronts. As I say we are making good progress, but ultimately there will be decisions for others in the energy system to make.

Claire Young

If you cannot achieve the flexibility have you worked out what you are going to do instead?

Kayte O’Neill

Through all our strategic planning we are looking at how we maintain a secure and resilient system. We do it for every time horizon from real time—this minute, the next hour—through to the medium and long term.

Claire Young

I would like to come back to you, Mr Slye, and broaden this out a little. In response to the Chair in the initial questions you said that NESO’s role was effectively making sure the right incentives were there to enable the market to do its job, rather than NESO stepping in directly. Later you said you do not think NESO can or should have all the levers; yet in answer to the last set of questions you were suddenly pulling all the levers. Are you clear on when NESO has a direct role to intervene and when its role is to create the right environment? I am looking at demand-side flexibility as an example. You have the enabling demand-side flexibility programme where you are performing a research role in identifying barriers to participation, and you have a policy development role and are developing a plan to remove those barriers, but it is not clear to me where your responsibility lies for delivering that plan. You obviously have this operational, very direct role. Is NESO’s remit too complicated and extensive?

Fintan Slye

No, I do not think so. What we need to do though is explain better what the roles and remits are, in particular the dividing line between us, Government/DESNZ and Ofgem. This was a theme that came up in the Public Accounts Committee, where I was with DESNZ and Ofgem last week talking about their audit, and it is something that we recognise that we need to do. Internally we are clear on the levers that we have. Back to what I said at the start we are also a relatively new organisation that has been given a new set of roles and responsibilities. There is not yet a shared understanding right across the industry about where the boundaries are, as evidenced by your question. We were talking to DESNZ and Ofgem about publishing something with greater clarity that would help that.

Claire Young

Do you not think that perhaps it would be better to split up operational day-to-day from the looking to the future and the more research and policy development side of it?

Fintan Slye

I do not. A benefit of having that long-term strategic planning in the same organisation as the operational side of the system is that, in developing those long-term plans, you can ensure that, when the situation arrives in the control room, you have factored all those things into those long-term plans in whatever the time horizon is that you needed to. In a lot of cases, by the time it gets to the control room the set of things that they can do shrinks down as you get closer to real time. You have to make sure that the toolbox you give them in the room on the day is sufficient to deal with anything that can happen on the system. That is what we are focused on. Therefore it is really important, in developing those long-term plans for the system, that we factor in right from the outset the operability of the system, the constraints and how we think about how it runs in the day and week ahead as well as in the minute in the control room.

Claire Young

How do you ensure that you have achieved that? Absence of it going wrong just proves that the circumstances have not arisen yet; it does not prove that you have it right. Particularly given all the issues raised in the report how do you have confidence that you have given them the right toolbox?

Fintan Slye

There are a number of mechanisms by which we provide assurance. First, we do this very publicly by publishing an operability strategy report that sets out how we see the key challenges facing the system as it evolves and what we are doing to address them and we run a set of industry engagements to talk to those and get feedback on it. Secondly, we work very closely with international system operators in particular those who face similar challenges or whose systems are going through broadly similar transitions as we are. We share best practice and experience, and challenge each other on what is happening there. Thirdly, we have an engineering advisory committee with external experts, academics, international system operators and so on that provide a level of challenge and assurance over what we are doing. As we talked about earlier we also have the new operability committee in place, which ensures that those forward-looking concerns by the control room are fed into this. We adopt a multi-layered approach because it is so important that we are thinking about these things right out into the future. An example would be that as the level of inertia goes down in the system inherently, with the closure of some fossil fuel stations—for example the closure of coal off the system—we put in place a programme many years ahead of time to go out and effectively purchase inertia as a service from the market. That required us to run a tender and people then had to build assets and deliver them onto the system. That is how we think about those things and think about them ahead of time.

Claire Young

I have one final question. You have described a really complex system with lots of different elements. Do you personally have the capacity to keep on top of all these elements?

Fintan Slye

I believe so. The control room is a team of 25 people who are in there as we speak, dealing with a set of really complex interdependent challenges. In terms of the long-term view of the system, I have a set of experiences working here and in other system operators’ control rooms and looking at the long-term development of these things. Through that and the learning and engagement I get from working with brilliant people around the organisation, that affords me the opportunity to do that.

Catherine Fookes

I have a couple of quick questions. I want to talk about the connections queue. The Butterfly solar-plus storage project, which would have been a really fantastic project, was canned in April because it was believed the queue would take too long to get connected. Is Wales getting its fair share of connections?

Kayte O’Neill

We worked really closely with Government to set out what was needed where on the energy system for the initial round of connections and through the work on the long-term strategic planning that we are doing. We talk about spatial strategic energy plans with a longer-term view of what is needed. That was co-commissioned by Welsh, Scottish and UK Governments and we have worked together closely on setting out what the system will need across the nations and regions. I cannot speak to that specific project but certainly if you recall, one reason reform was needed in the first place was that we had more than four times the number of projects in the queue than we actually need on the system to connect. The process that we have been through has been to prioritise projects that are needed, strategically aligned and ready to go. That means that some projects do not have a connection offer in the current process; they will come forward over time should there be space on the system to connect them.

Catherine Fookes

Presumably that queue is really holding back growth in renewable energy. You talk about need but obviously there is a need: we want to replace fossil fuels with renewable energy. There is a need for all these renewable energy projects.

Kayte O’Neill

I completely agree. It is just that there were four times as many in the queue as we needed. Just to give you a sense of it, the energy system today has a less than 50 GW system, with 800 GW in the queue waiting to connect. We do not need all the projects that are in the queue. The process that we have worked with industry to develop over many years has given priority to the order in which they applied. Again I cannot speak to that individual project without going and checking on it but if the project—ie the technology—is needed in that area and the project is ready to go, based on the order in which it applied, those are the projects that have been prioritised. Through our ongoing strategic planning processes we keep really looking at what is needed where across nations and regions to make sure we have what we need.

Catherine Fookes

I have recently seen that the Plaid Cymru Government have put out a consultation about not using pylons and undergrounding a certain amount of the grid through mid-Wales. Will that again slow down our transition and grid capacity considerably if they decide everything has to be undergrounded?

Kayte O’Neill

It is not a NESO specialist area, for want of a better word, but it has been an ongoing debate over many years as to the pros and cons of undergrounding versus overhead lines. There are timing and cost questions and those play out in the decision making.

Catherine Fookes

It will make connecting up much more expensive, will it not?

Kayte O’Neill

It is very expensive to underground, relatively speaking.

Chair

Do you have a figure for how much more expensive?

Kayte O’Neill

We could definitely provide it for you. NESO has done that analysis; I just cannot remember the figure.

Chair

Yes, please provide that. On the subject of connections, one concern raised with us even after the reforms that you have carried out is that where storage is being added by developers it is being discounted and not allowed to be added to the mix, which seems odd. I take your point that you are trying to reduce the numbers when there are four times as many applications as there is capacity. Do you understand why people are so frustrated by this? It is giving two opportunities at the same time, often in the same location, and that is being turned down for developing the new capacity that is ultimately your objective.

Kayte O’Neill

We absolutely understand the value of what we would describe as hybrid projects. A project that puts solar and storage together adds huge value to the system, and as we look ahead we are really keen to extract the value of those types of project. The first phase of connections reform did not allow for storage to be added latterly to an existing project, mainly from a fairness point of view. There is already so much in the queue; if you were to change those projects in real time, that storage is effectively jumping ahead of other projects that are already there and waiting to connect. We are deep into implementing the first phase of connections reform. We actually review the methodologies and rules annually, and this question of hybrid projects is one that has been consulted on and is currently being thought about. As we open new windows in future for new projects to come forward and join the queue, how can we make sure that we can extract the value of those hybrid-type projects?

Chair

Similarly as new technology emerges and existing technology advances, that changes the calculation, whether it is storage or generating technologies. Are you going to change your methodology to reflect this?

Kayte O’Neill

It is really important that the rules and processes stay agile to the changes that are going on in the system and the technology, which is why we are very strong supporters of having these annual reviews. We spend a lot of time with customers, developers of projects and the trade bodies that support them making sure that we understand how projects are evolving and changing how we think about those evolving technologies.

Chair

Obviously there is a crossover with Ofgem’s responsibilities in regulation and things such as cap and fill with long-duration storage. Are you in close contact there on updating methodologies? You make the point about fairness; is it fair to consumers to have to wait for increased generation of cheap electricity?

Kayte O’Neill

We absolutely want to get these projects connected. Connections reform has been a really bold step for industry but one that was absolutely needed and we have worked really hard to advance and bring it forward. We also recognise—as we get the generation connected—that we need to build the network to move that power from where it is generated to where it is needed. They are very interdependent challenges.

Chair

I will just finish with this point. We have been talking to you for two hours now. We have set out the scale and range of the challenges and talked about the grid queue, speeds of connections, balancing and constraint costs, the challenge of building the new network and demand-side flexibility and the clean flexibility road map. That is a very wide and extensive list. Of course there are other responsibilities of what you do in the control room day-to-day. Does all this not set out just how critical it is that you engage with staff at all levels? Do you accept that it is not a command-and-control culture; the expertise within the organisation—this is true of many organisations—will deliver the agenda that addresses all those problems and it is just not possible for you to do that centrally? Do you take that point away from not just this session but from the review findings?

Fintan Slye

I absolutely, completely agree. It is fair to say that NESO has brilliant people working for it who will rise to any challenge that they are set and solve it. I completely agree with your point around making sure that we have the environment in place that allows them to do that.

Chair

We will invite you back soon for an update on how well you are doing against that pledge. Kayte O’Neill and Fintan Slye, thank you very much for your evidence. That is the end of our session.