NESO proposes CMP457 to overhaul ORPS reactive power compensation methodology under CUSC

NESO has raised CUSC Modification Proposal CMP457, seeking to replace the current single-rate, gas-price-linked compensation methodology for the Obligatory Reactive Power Service (ORPS) with a cost-reflective, fair and transparent payment methodology, following output from NESO's ORPS project review. The Proposer recommends Standard Governance with Workgroup assessment.

ORPS compensation currently reflects legacy assumptions tied to gas-fired generation costs, which is increasingly misaligned with a system dominated by renewable and battery generation whose intermittent, non-synchronous, and regionally concentrated characteristics create unpredictable reactive power needs. A redesigned, cost-reflective model affects all Transmission Entry Capacity Generators bound by the Grid Code, Transmission Owners managing reactive power constraints, and ultimately consumer costs, with a targeted implementation date of 01 April 2027.

This is a fundamental reactive power ancillary service redesign rather than a parameter update. The shift from a single-rate model to a prospective cost-reflective multi-rate structure addresses adverse selection and cost-allocation distortions created by the changing generation mix (synchronous thermal to non-synchronous renewables/storage). Key design tensions include: (1) locational aspects, since reactive power correction is inherently local and large-scale synchronous retirement has created regional reactive power scarcity; (2) the interaction between ORPS obligatory payments and NESO's separately evolving reactive capacity market products; (3) potential effects on Grid Code compliance incentives, as a cost-reflective rate may improve provider participation and reduce NESO's reliance on remedial actions/constraint payments. The proposal remains at an early stage — alternative solutions are still being modelled and no draft legal text exists yet, meaning design uncertainty is high. Workgroup consultation outcomes (Jan-Feb 2026) will be pivotal in narrowing the solution space before the Draft Final Modification Report in July 2026.

Connection and Use of System Code (CUSC); Grid Code; Regulation (EU) 2019/943 as retained post-Brexit (SI 2020/1006)

Workgroup Consultation

Primary sources