Industry Updates

Consultation Updates

Government publishes response to the consultation on Energy Code ReformEarlier this month, BEIS published its decision (Energy code reform: governance framework) to the consultation on the Energy Code Reform. The response confirmed that BEIS will be implementing its preferred option for code governance reform which includes a new strategic body function for Ofgem. BEIS also published its decision on the creation of a ‘Future Systems Operator.’

What do these new functions mean?
BEIS consulted on creation of a Future System Operator (FSO) in 2021 and set out its view that such a body would provide a more whole system approach that would support the government's ambitions to meet its Net Zero Strategy.BEIS has confirmed that it will proceed with the creation of the FSO where it is envisaged that the FSO would be an expert and impartial body in public ownership but not subject to day-to-day operational control of government. It will focus on both gas and electricity systems and take on roles in operating, planning and developing the network.It is envisaged that the FSO will have:

an advisory role to provide advice to decision making organisations drawing on its expertise

enhanced roles in strategic system planning

enhanced functions in market development

new roles in co-ordination across distribution networks and energy infrastructure; and

new and enhanced roles in developing engineering standards

Ofgem’s new strategic body function
As part of the 2021 consultation on the Design and Delivery of the Energy Code Reform, BEIS looked at the governance models to support its proposals. This included, either a designated role for Ofgem as a strategic body over the codes alongside licenced code managers or providing the FSO the role of an Integrated Rule Making Body.BEIS had concluded that it will proceed with its preferred model to provide Ofgem with the strategic function as an additional activity. This new role for Ofgem will include the ability to establish and regulate (via licence) one or more code manager(s). As a result of these functions, we can expect to see Ofgem:

Publish an annual strategic direction – Ofgem will be required to set out its ‘vision’ for how the codes should evolve over the following year, which the code managers will then implement. The strategic direction must also have regard to the latest Strategy and Policy Statement published by BEIS and any advice provided by the Future Systems Operator. The strategic direction will be subject to public consultation.

Ability to change the codes directly – this will be available to Ofgem in a limited range of circumstances (e.g., where critical or urgent). These changes would be subject to public consultation. Additionally, BEIS will have the power to veto, and there will be a right of appeal to the CMA.

Licensing code managers – Ofgem will have the power to select and license a code manager for each in-scope code or engineering standard. These will be selected from a range of options, including both competitive and non-competitive; and

Power to issue directions to in-scope central system delivery bodies - this is to ensure that these bodies deliver what is required by a code or reasonably necessary to facilitate its operation.

The scope of the new governance framework will extend to the 10 current electricity and gas codes, as well as relevant central system delivery bodies and engineering standards.Whilst the exact timetable is to be determined, as it is dependent on changes to primary legislation, the ambition is that Ofgem will have these powers by 2023.

If you’d like to discuss the impacts of the Energy Code Reform programme on REC with the team, please contact Suchitra at info@retailenergycode.co.uk.

According to the Telegraph, and other news outlets, the Government is considering removing green levies to help alleviate household pressures with increasing energy bills. A levy in consideration currently adds £153 to the average energy bill and is largely used to fund renewable energy schemes.

Market analysts predict that energy bills will remain over £2,000 for 2023 and 2024. Chief Executives from four energy companies explained the impacts on consumers of the high prices at a BEIS Select Committee on 19th April 2022. This is part of a wider Inquiry into energy pricing and the future of the energy market.

BEIS publish the British energy security strategy on 7th April 2022. Offshore wind, nuclear and hydrogen seem to be the biggest areas of ambition and funding. Although it states that this strategy is about reducing reliance on Russian gas, there is little in the short term that will achieve this, with most of the content achievable from 2025+. A clear strive for energy efficiency measures is noted, by offering consumers low-cost green finance via retail lenders and the government will set up an energy advice website to support consumer questions.

Various news outlets have reported that consumers may be required to pay administration costs for the £200 energy discount they are due in October 2022. Reports outline that the costs could be of the magnitude of tens of millions of pounds. The rebate is planned to be repaid by consumers in annual instalments of £40 from 2023.

Did you know...?

Paul Gath, RECCo

Paul Gath, one of RECCo's consultants is a published photographer? This month we hear from Paul on his passion for photography.

Industry Snippets

Hello, I’m Paul Gath and I joined the RECCo team in July last year.My background is in IT, and I have worked in the energy industry for over 20 years, so it’s good to see lots of familiar faces. I’m a northerner by birth, although I’ve lived in the south of England far longer than I lived ‘up north’.I spend most of my time at RECCo looking at technical and legal documents, making sure that we have all the right things in place as we get nearer the deadline of the new switching arrangements. Not only do I get to spend time with the team here at RECCo, but I also get to work with friends from C&C Group, CapGemini, Gemserv, Deloitte as well as Xoserve, as we bring the Gas Enquiry Services under our belt.I spend a lot of my free time pursuing my two main hobbies: music and photography. I’m really pleased to have been featured in April’s edition of Outdoor Photography magazine (issue 279), which ran an 8-page interview with me, including a selection of my landscape work. I’m fortunate to have travelled to some exciting places for my photography, but my bucket list isn’t getting any shorter! More details here.

Two of Paul's fantastic landscapes.