Energy Code Reform
About energy code reform
The industry codes set out the detailed rules of participation in the gas and electricity markets, underpinning market operation. Energy code reform aims to ensure that the codes can respond to the significantly changing sector, enabling change to be delivered more efficiently and effectively in the interests of consumers, and to support the transition to net zero.
The reforms aim to create a framework that:
- is forward-looking, informed by and in line with the government’s ambition and the path to net zero emissions, and ensure that codes develop in a way that benefits existing and future energy consumers
- is able to accommodate a large and growing number of market participants and ensure effective compliance
- is agile and responsive to change whilst able to reflect the commercial interests of different market participants to the extent that this benefits competition and consumers
- makes it easier for any market participant to identify the rules that apply to them and understand what they mean, so that new and existing industry parties can innovate to the benefit of energy consumers.
Ofgem's role
The Energy Act 2023 provides new powers and obligations for Ofgem to deliver the new framework:
- Ofgem will have a new strategic role for designated codes, publishing an annual strategic direction to set out our vision of how codes should evolve in the coming year
- code managers, selected and licensed by Ofgem, will be responsible for governance of the codes
- Ofgem will have new powers to change the codes in a limited range of circumstances (where the normal processes would not be appropriate), and to issue directions to central system delivery bodies
- to facilitate implementation of this new governance framework, the Energy Act 2023 sets out transitional powers for Ofgem.
We are working jointly with DESNZ to develop the regulatory framework required to implement the reforms. DESNZ published a joint consultation with us in March 2024. Key milestones for implementation include:
- secondary legislation – regulations under the new Act will be required prior to the appointment of code managers
- licences and codes – a package of changes to existing codes and licences, and the designation of standard licence conditions for code managers, is required to implement the reforms
- transition – Ofgem will select and licence code managers and put in place any necessary transitional arrangements
Ofgem’s publications and decisions relating to energy code reform can be found below.