Energy Code Reform

Reform to the industry code governance arrangements will ensure that the energy 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.  

In July 2019, Ofgem and BEIS published a joint consultation setting out proposals for a reformed code governance framework. These proposals were informed by the CMA’s energy market investigation which found the existing code governance framework resulted in adverse impacts on competition arising from code parties conflicting interests. It also found that there are limited incentives to deliver policy change in the interests of consumers. In July 2021, we issued a further joint consultation on the design and delivery of energy code reform. The April 2022 government response confirmed our approach and the reforms were set out in the government’s Energy Security Bill, which successfully passed through parliament and received Royal Assent in October 2023. The Energy Act 2023 provides new responsibilities and powers for Ofgem:

• 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 Security Act 2023 sets out transitional powers for Ofgem.

Ofgem, working jointly with DESNZ, is now developing the regulatory framework required to implement the reforms. We are also developing proposals for use of the transitional powers set out in the Energy Act, including potential code consolidation (to merge two or more codes together). 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.