Decision on the preliminary Strategic Direction Statement and governance arrangements for industry codes

The Energy Act 2023 gives Ofgem new powers and responsibilities to implement significant reform to the governance of the industry codes. 

The transitional powers provided by the Act gives Ofgem new functions to set the direction for the development of designated electricity and gas industry codes, as well as the ability to modify licences and codes. 

In January 2025, we sought feedback on our proposed preliminary Strategic Direction Statement (SDS) and proposed changes to code governance arrangements. Changes to code governance arrangements consist of: 

• a consistent modification prioritisation process 
• a licence obligation to cooperate with the code modification process where it supports SDS alignment, at a code manager’s reasonable request. 

These proposals intend to support the implementation of the SDS and the transition to future code governance arrangements. This decision document summarises responses to that consultation and sets out our proposed next steps. 

Updated preliminary Strategic Direction Statement 

We have published our preliminary SDS alongside this decision. On the basis of consultation responses, an updated strategic review of the sector and careful consideration of our policy teams, we have decided to make several changes to the SDS. These are explained in our decision.  

Updated proposed legal drafting of code modification prioritisation procedure in Annex A 

We have published our proposed legal drafting of code modification prioritisation procedure alongside this decision. We have carefully considered stakeholder feedback on our proposals and have made several changes to this document. These are shared for transparency to provide context as to our emerging thinking on this policy area. We intend to consult further on the particulars of the proposed code modification text as part of a future consultation pursuant to Schedule 12 to the Energy Act 2023.  

We have also considered additional policy changes and have flagged these changes as further proposals within this Annex. These changes will be consulted on as part of future publications under Schedule 12 to the Act. 

New proposed Authority guidance on code modification prioritisation in Annex B 

Following consultation we have developed Annex B: Definitions to form future guidance on code modification prioritisation. It is now titled ‘Annex B: Proposed authority guidance on code modification prioritisation’ and is published for illustrative purposes alongside this decision.  

This has been based on our careful consideration of stakeholder feedback, as well as additional policy changes that we intend to take forward to further consultation. Our proposed changes are contained within Annex B and shared here for transparency. No final decision has been made on the content of the guidance, as this will be subject to further consultation.