BEIS Ofgem Consultation - Reforming the Energy Industry Codes
25 July 2019
Closing date 16th September. BEAMA will respond to this consultation and ask for member comments by the 10th September. A draft response will be shared with members soon.
Summary
BEIS and Ofgem are seeking the views of interested parties, including existing code parties, wider industry players, consumer groups, academics and existing code administrators on issues with code governance and proposals for what improvements could be made and how. They are particularly interested in evidence on potential costs of different approaches.
The gradual evolution of code governance has left the overall framework fragmented, complex and poorly co-ordinated, with weak incentives to drive timely change. Processes and accountabilities that may have been appropriate when individual codes were established over the last couple of decades, may no longer be best suited. The rules governing the energy system need to adapt much more rapidly to enable the transition towards a more flexible energy system with net zero emissions, while minimising costs and protecting consumers. Reforming the code governance framework could, therefore better facilitate strategic changes in the sector, unlocking innovation and significant benefits to consumers. Our desired outcome is an energy code framework that:
1. makes it easier for any market participant to identify the rules that apply to them and understand what they mean; making it easier for new and existing industry parties to innovate to the benefit of energy consumers;
2. is forward-looking, informed by and in line with the Government’s ambition and the path to net zero emissions; and ensures that codes develop in a way that benefits existing and future energy consumers;
3. is agile and responsive to change that benefits energy consumers, while able to reflect the commercial interests of different market participants, to the extent that this benefits competition and consumers; and
4. can accommodate a large and growing number of market participants, with effective compliance in an inter-dependent system.
The have identified four areas for reform, and proposed options for a new institutional framework to oversee this. The reforms identified are thos considered to improve the existing arrangements:
1. Providing strategic direction: ensuring the regulatory framework is forward looking and is informed by the Government's vision for the energy system. We propose creating a new function that can take account of that high-level vision and translate it into a strategic direction for codes that promotes the interests of consumers. This is intended to address the current fragmentation and lack of co-ordination between the codes.
2. Empowered and accountable code management: a mechanism for ensuring that the strategic direction is delivered through appropriate changes to codes and that these changes are progressed in a clear and logical manner across codes. We consider this could be achieved through the creation of an empowered code manager function that has the right expertise, resources and powers to oversee the change process; monitor compliance with code obligations and decide on appropriate measures in the event of non-compliance.
3. Independent decision-making: rebalancing decision-making away from industry control, to arrangements that are agile and responsive to change and work in the interests of existing and future customers, where the right incentives drive the design of rules and systems, while continuing to draw on industry input and expertise.
4. Code simplification and consolidation: to improve accessibility: simplify and consolidate codes, removing unnecessary content, and ensuring codes are suitably adaptive to a changing industry. This could enable innovation and lower barriers to entry by making codes clearer, more transparent, and accessible. Fewer and simpler codes would also be easier to rapidly change in response to strategic priorities.
