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 EU Exit 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 UK’s exit from the EU.
Some of our key work streams on EU Exit include:
- Preparing to make consequential changes that would be needed to energy company licences 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 EU Exit, 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 EU Exit 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 EU Exit scenarios.
What does EU Exit 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 EU Exit.
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
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 proposed Withdrawal Agreement is agreed, 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.
If the UK leaves the EU without a deal, 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 a statutory consultation 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.
We encourage the industry to ensure modifications to the codes are raised in a timely way. To minimise uncertainty for market participants, it is vital that ‘day 1’ code changes are prioritised and 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-EU Exit domestic legislation.
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 which guards against wholesale market abuse.
Regardless of whether the proposed Withdrawal Agreement 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 the Withdrawal Agreement is implemented, during the period to 31 December 2020 our working assumption is that current REMIT registration and data reporting channels will remain unchanged.
However, if the Withdrawal Agreement is not implemented and the UK leaves the EU without a deal, changes to REMIT registration and data reporting requirements will take effect from 29 March 2019. We set out these changes on the No-deal EU exit REMIT contingency arrangements – Update 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 the proposed Withdrawal Agreement is not implemented, 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 MPs 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).
If the proposed Withdrawal Agreement is implemented, the existing data reporting requirements will remain until the end of 2020.
If the UK leaves the EU without a deal, this data will no longer be reported to ACER. Instead, there will be a review period after EU exit 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 do not expect these arrangements to impact on our ability to police wholesale markets.
Interconnectors and cross-border trading
In preparation for the UK’s EU Exit, we have engaged with neighbouring National Regulatory Authorities (NRAs) and interconnectors for both electricity and gas.
Continental interconnectors (IFA, Britned and Nemo Link) have consulted on Access Rule changes required in the event that a no deal EU Exit results in loss of single day-ahead market coupling. We have worked with neighbouring NRAs to approve these rules. If they are unable to take part in single day-ahead market coupling, they will be able to continue operating under these new rules. The interconnectors are testing their operational preparedness for this scenario.
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.
We have engaged with interconnectors and neighbouring NRAs to understand the need for changes to access rules and charging methodologies in different EU Exit scenarios. IUK and BBL interconnectors have not identified any changes needed to be made prior to Exit Day to ensure operability. However, limited references to EU law could 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 EU Exit. We will continue to issue REGOs and accept guarantees of origin (GoOs) from EU member states after EU Exit Day. REGOs issued in the UK will no longer be recognised by EU member states after exit day in a no deal scenario. Under the draft withdrawal agreement published by the UK government on 25 November 2018, there will be an implantation period, during which UK REGOs will continue to be recognised by EU member states until 31 December 2020.
How can I find out more?
Government technical notices
Government have also published technical notices for the electricity and gas sectors:
- Electricity Trading: The Trading electricity if there’s no Brexit deal guidance informs industry participants and other stakeholders about changes to the cross-border trading and supply of electricity in the event that the UK leaves the EU in March 2019 with no agreement in place.
- Generating low-carbon electricity: The Generating low-carbon electricity if there’s no Brexit deal guidance explains to electricity generators and suppliers, installers of certain microgeneration technologies, and renewable electricity suppliers and generators how the following will apply in the event that the UK leaves the EU in March 2019 with no agreement in place.
- Gas Trading: The Trading gas with the EU if there's no Brexit deal guidance provides gas market stakeholders with an explanation of how the trading of gas with European states will operate in the event that the UK leaves the EU in March 2019 with no agreement in place.
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