As the UK prepares to leave the European Union (EU), Ofgem (Great Britain’s energy regulator) has been working closely with Government and industry to provide technical and regulatory advice.
Ofgem has no direct engagement in the Government's Brexit negotiations. Our role is to work with Government and energy industry stakeholders to ensure that our regulatory framework is fit for purpose and protects customers, whatever the arrangements are for the UK’s exit from the EU.
Some of our key work streams on Brexit include:
- Preparing to make consequential changes to energy company licences that would be required if the UK leaves the EU without a deal.
- Engaging with code administrators and panels to support their preparations if the UK leaves the EU without a deal.
- Ensuring continued compliance after Brexit, with the REMIT Regulation to guard against wholesale market abuse.
- Engaging with interconnector operators and our regulatory counterparts in the EU to ensure suitable contingencies are in place.
- Advising Government on the impact of Brexit on our regulatory regime, including the Government’s Statutory Instruments (SIs).
Ofgem continues to work with central government and stakeholders across industry to ensure that our regulatory framework is fit for purpose in a range of potential Brexit scenarios.
What does the Implementation Period mean in practice?
By application of the EU Withdrawal Agreement, the UK is leaving the EU on 31st January 2020 at 23:00 GMT. It is entering a new phase called the Implementation Period, currently scheduled to end on 31st December 2020. During the Implementation Period, the UK and all relevant parties in the energy sector will still be bound by EU law. This is a continuation of the status quo for market participants, with no changes to current arrangements.
What does Brexit mean for Ofgem’s regulatory approach?
Britain has diverse energy sources and GB’s market-based energy system has repeatedly proved to be resilient to challenges. We expect this to remain the case after Brexit.
Whatever the arrangements are for the UK’s exit from the EU, we will:
- Ensure that our regulatory approaches continue to support competitive markets in which energy flows across borders and ensure the consumer benefits from this are maximised.
- We will maintain robust consumer protections and support competitive energy markets to ensure consumer benefits are maximised. This includes our default and pre-payment price caps that make sure customers aren’t overcharged for their energy.
- Continue to monitor and enforce regulations domestically to ensure we have a robust regulatory regime that works for consumers. We explain how this would work further down this page.
- Continue to support Government and energy companies to ensure our regulatory framework remains fit for purpose.
Finally, we will continue to work closely with market participants as they seek to understand the impact on their business and any interactions with our regulatory regime.
Impact on the licensing regime and industry codes for energy companies
We are confident our regulatory framework is fit for purpose for a range of Brexit scenarios, including a no-deal Brexit.
Ofgem grants licences to companies so they can operate in GB’s energy market, and licensees must comply with the rules contained in their licence. Some of the licence conditions and industry codes reflect EU legislation. We have reviewed licences to identify interactions with EU law.
If the UK leaves the EU with a deal, our working assumption is that changes to licences and codes will not be required during the implementation period, which is currently set to end on 31 December 2020.
In a no-deal scenario, the majority of licences will need to reflect legislative changes. Our aim is to make these changes to licences as close to Exit day as is practically possible. We have published our minded-to position on the changes we intend to make.
Changes to industry codes are being taken forward through the industry-led code change process. Code administrators have reviewed the codes to identify where changes may be required in the event the UK leaves the EU without a deal.
Relevant industry parties, in coordination with Code Administrators, are ready to make the required changes in the event of a no-deal scenario. We have communicated the importance of ensuring that ‘day 1’ code changes are prioritised so that the regulatory framework is updated in a timely manner. By ‘day 1’ changes, we mean consequential changes required to update industry codes in line with the post-Brexit domestic legislation. We will continue to engage with Code Administrators to support the work they have been undertaking.
If you are an energy company operating in the GB energy market, you should make sure you are aware of these potential changes to licences and codes.
What is REMIT and how would it be enforced after the UK leaves the EU?
REMIT is an EU-wide Regulation that guards against wholesale market abuse.
Regardless of whether the proposed deal is implemented, Ofgem will continue to monitor and enforce GB wholesale energy market integrity and transparency as it does currently.
The obligation on market participants to publicly disclose inside information in an effective and timely manner, as well as prohibitions on insider trading and market manipulation, will remain.
If there is a deal, our working assumption is that current REMIT registration and data reporting channels will remain unchanged during the transition period to 31 December 2020.
However, if there is no deal, changes to REMIT registration and data reporting requirements will take effect from the day after the UK leaves the EU. We set out these changes here and summarise them below.
REMIT Registration if there is no deal
Registration for market participants trading energy in Britain
The REMIT Regulation requires all market participants that trade energy in any EU Member State to register with the national energy regulator in the country where they are based.
If there is no deal, the arrangements for trading energy for use in Britain will be that:
- Ofgem will continue to recognise the registration of market participants that are currently registered with us.
- Ofgem will recognise the registration of any market participants currently registered with a National Regulatory Authority of an EU Member State, or with the Utility Regulator for Northern Ireland, until further notice.
There is no need for market participants to take any action if they are already registered.
New participants who need to register with us for the first time, or existing market participants wanting to amend their Ofgem registration, should contact us directly at REMIT.Registration@Ofgem.gov.uk.
Registration for market participants trading energy in an EU Member States
Market participants currently registered with Ofgem, and who wish to enter into transactions or place orders to trade in wholesale energy products where delivery is in the EU, will be required to re-register with a NRA of an EU Member State. Consistent with the EU Agency for Cooperation of Energy Regulators’ (ACER) guidance letter published on 8 January 2019, affected market participants are advised to initiate this process now, if they have not already done so.
Data collection for monitoring REMIT
The REMIT Regulation requires that market participants report transaction data on wholesale energy trading to the Agency for the Co-operation of Energy Regulators (ACER).
In a deal scenario (where the Withdrawal Agreement is implemented), the existing data reporting requirements will remain until the end of 2020 as part of the transition period.
In a no-deal, this data will no longer be reported to ACER. Instead, there will be a review period after Brexit during which Ofgem will consult with industry stakeholders on the best way to report GB REMIT data.
GB market participants will not need to report data to Ofgem during this time. Instead, Ofgem will continue to monitor the market for possible breaches of market integrity using existing data sources. These include trade and order data currently collected directly from GB brokers and exchanges.
Ofgem’s monitoring will capture the vast majority of trading activity in GB. We are confident that these arrangements will not affect our ability to police wholesale markets.
Interconnectors and cross-border trading
In preparation for Brexit, we have engaged with neighbouring Regulatory Authorities (RAs) and interconnectors for both electricity and gas.
In either deal or no-deal scenarios, we do not expect Brexit to interrupt the flows of electricity and gas across GB’s interconnectors. Below we outline how Brexit will affect cross-border trading.
If the UK leaves the EU with a deal, GB’s interconnectors will continue to have access to implicit trading through single day-ahead market coupling. This is where transmission capacity on the interconnector is included in the auctions of electrical energy at the day-ahead stage.
If the UK leaves the EU without a deal, contingencies have been prepared to allow the interconnectors to continue flowing. Interconnectors between GB and Continental Europe will switch to explicit trading arrangements. This is when transmission capacity on the interconnector is auctioned to the market separately from electrical energy, and the switch in arrangements will happen as soon as the UK leaves the EU without a Withdrawal Agreement (a no-deal Brexit).
We have worked with neighbouring regulatory authorities to approve Access Rules to apply in the event the UK leaves the EU without a deal for both existing interconnectors (IFA, BritNed, Nemo Link) and planned interconnectors (ElecLink, IFA2) between GB and Continental Europe. These rules will come in to effect if the UK leaves the EU without a deal on 31 January 2020.
Irish interconnectors have not yet consulted on proposed changes to Access Rules and we do not currently expect to receive a submission ahead of Exit Day. If there’s no single day-ahead market coupling between GB and Ireland because of a no-deal Brexit, the Irish interconnectors will fall back to intraday implicit trading.
The SEM Committee has published further details on these fallback arrangements.
We have engaged with interconnectors and neighbouring NRAs to understand the need for changes to access rules and charging methodologies in different Brexit scenarios. IUK and BBL interconnectors have not identified any changes that need to be made prior to Exit day to ensure operability. However, limited references to EU law would be changed in future reviews.
Renewable Energy Guarantees of Origin (REGOs)
Renewable Energy Guarantees of Origin
Ofgem’s administration of the REGO scheme and fuel mix disclosure is not affected by Brexit, and we will continue to issue REGOs and accept guarantees of origin (GoOs) from EU member states after Exit day in all Brexit scenarios. We also expect market participants to be able to meet proof of supply requirements in GB under both implicit (deal) and explicit (no-deal arrangements for Continental interconnectors) trading arrangements.
If the UK leaves the EU with a deal, UK REGOs will continue to be recognised by EU member states until the end of the implementation period (31 December 2020). In a no-deal scenario, there will not be a transition period and UK REGOs will no longer be recognised by EU member states after Exit Day.
Please see the “Interconnectors and cross-border trading” section for more details on interconnector arrangements in various Brexit scenarios.
How can I find out more?
Government technical notices
Government have also published technical notices for the electricity and gas sectors:
- Electricity Trading: This guidance informs people working in the UK electricity market and other stakeholders about changes to the cross-border trading and supply of electricity if there’s a no-deal Brexit.
- Generating low-carbon electricity: This guidance explains how low-carbon electricity will be recognised and certified if there’s a no-deal Brexit. It is for electricity generators and suppliers, installers of certain microgeneration technologies, and renewable electricity suppliers and generators.
- Gas Trading: This guidance provides gas market stakeholders with an explanation of how the trading of gas with European states will operate in a no-deal Brexit and outlines the actions you will need to take to prepare.
If you have a question or you have a concern that relates to our regulatory framework please get in touch with us at: EUExit@ofgem.gov.uk.