Ofgem and BEIS launch Consultation on how to overhaul the ‘overly complex’ UK energy code governance framework
The energy regulator Ofgem and the Department for Business, Energy and Industrial Strategy (BEIS) have published a consultation on overhauling the current UK energy code governance framework.
Why the need for a new energy code governance framework?
The energy industry is changing fast as new technologies and methods of generation are adopted. According to Ofgem and the BEIS, the current governance framework needs to be updated and changed to help enable this rapid change.
The move towards cleaner energy has also meant that the current system which was created to guide the industry following its privatisation in the 90s is no longer capable of keeping up with the increasingly decentralised and distributed system seen in the UK today.
It was also recognised in the energy white paper released last year that the current framework has become too complex, lacks the incentive to innovate and is too fragmented to keep up with the changes required.
What are they proposing to reform?
Ofgem and BEIS said four main areas require reform. These are:
- Code simplification and consolidation
- Providing strategic direction
- Empowered and accountable code management
- Independent decision making
These four areas cover all of the areas that the current electricity and gas codes as well as engineering standards. In short, they want wholesale change to the current framework.
The two organisations have also proposed that the numerous central system delivery bodies be brought into scope. These include the smart systems operated by the Data Communications Company (DCC), Elexon and the Data Transfer Service operated by Electralink.
Two models proposed
In the consultation the BEIS and Ofgem laid out two possible models for delivering a more agile code system.
The first model would see Ofgem acting as a strategic body working with a separate code manager. This would see the regulator developing and publishing directions for codes yearly. It would then be up to the code manager to develop an annual plan to deliver.
Under this plan, the code managers would be chosen via a tender process and would replace the current code administrators after a transition period.
Under the second proposal, a new Integrated Rule Making Body would operate within the recently announced Future System Operator (FSO) that would take many responsibilities away from organisations such as National Grid.
This proposal would see the most dramatic change as the new body would hold most of the responsibilities mentioned in the first model and would see Ofgem retain some oversight and decision making powers to avert any potential conflicts of interest.
If the consultation results in the first model being chosen, we can expect to see delivery of code consolidation begin in 2024, if the second model is chosen then 2026 is the expected start date.
The consultation will run until the 28th of September 2021.
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