Energy code reform: code manager licensing and secondary legislation
Read the full outcome
Detail of outcome
We have decided to proceed with the proposed broad code manager licence conditions set out in the consultation. Code managers will:
- carry out their core regulated activities on a not-for-profit basis
- publish and consult on a draft budget, then set their forecast costs ahead of the forthcoming budget period
- recover their costs using mechanisms determined by Ofgem, on a code-by-code basis
- be required to report publicly on their performance, without being subject to financial incentive mechanisms or revenue at risk
- follow measures to ensure their independence and prevent conflicts of interest
- be subject to a package of financial and operational controls
- be responsible for maintaining and modifying the relevant code
On code manager selection, we have also decided to proceed with the proposals set out in the consultation. Ofgem will:
- conduct a conflict-of-interest assessment of prospective code managers
- have discretion to choose code managers via a competitive or non-competitive route
- set assessment criteria for licensing code managers on a non-competitive basis
- be able to create and licence a new Special Purpose Vehicle (SPV) via the non-competitive selection process
Following the publication of the government response we intend to:
- lay secondary legislation to formally establish the code manager non-competitive selection regime by the end of 2024
- consult on a full draft of standard licence conditions in 2025
Detail of feedback received
We received 27 responses to this consultation from a wide range of interested parties, including:
- code panels and code administrators
- energy suppliers
- energy transmission and distribution companies
- other interested parties, such as industry associations and consumer groups
Most respondents agreed with the proposals related to the code manager licence, including the high-level licence content. Our proposals on the code manager selection process and proposed regulation content were also well-received.
Many respondents expressed a desire to engage further on elements of our proposals. Ofgem and the Department will consult further on the areas highlighted in this consultation response.
Original consultation
Consultation description
Update 24 April 2024
We corrected a typographical error in the consultation document. Specifically, we included a question (Q4.2) regarding views on the proposals concerning Chapter 4 - Code Manager Funding and Cost Recovery.
In this joint DESNZ / Ofgem consultation, we set out our initial proposals for code manager standard licence conditions and selection processes.
This follows our previous consultations:
- in 2019, we set out our desired outcome for energy code reform - an institutional governance framework that is forward-looking, agile, easy to understand, and able to accommodate a growing number of market participants
- our 2021 consultation and response stated our intent to establish a regulatory regime for new ‘code managers’ as licensed bodies who would undertake current code panel and administrator roles
- we also proposed a new strategic role for Ofgem to provide direction for the codes’ development. The code manager licensing arrangements will be designed to ensure that strategic change can be delivered, effectively and efficiently
We are now developing the secondary legislation and regulatory framework for code managers, which will allow Ofgem to implement the reformed framework and drive strategic changes across the codes in the interest of consumers and competition. This consultation covers:
Code manager licence
We set out the proposed high-level contents of the code manager licence, covering these priority areas:
- not-for-profit requirement
- setting budgets
- cost recovery and funding
- incentivisation
- conflicts of interest and independence
- financial and operational controls
- code maintenance and modification
Code manager selection
We set out proposals for the secondary legislation that will underpin Ofgem’s code manager selection process, including:
- who will be eligible for selection
- how Ofgem will determine whether to pursue competitive versus non-competitive selection for each code
- how any non-competitive selection process would work
We also set out a view that the proposed selection route criteria – speed of delivery and value for money – may lead Ofgem to pursue non-competitive selection in many cases, such as where a code has not been consolidated and an eligible incumbent body already exists.
Responding to the consultation
The consultation is open to all, but we would specifically like views from:
- existing code parties
- existing code administrators
- wider industry players
- consumer groups
- academics
If responding via email, please copy your response to both the Department for Energy Security and Net Zero and Ofgem:
Consultation webinar
Following the launch of this consultation, DESNZ and Ofgem held a webinar on Tuesday 26 March 2024.
During the event we summarised our key proposals and answered questions on both this joint consultation and also on Ofgem’s separate but related energy code reform: implementation consultation.
Documents
Updates to this page
Published 11 March 2024Last updated 8 October 2024 + show all updates
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Government response published.
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We have corrected a typographical error in the consultation document. Specifically, we have included a question (Q4.2) regarding views on the proposals concerning Chapter 4 - Code Manager Funding and Cost Recovery.
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First published.