Energy code reform: code manager licensing and secondary legislation

Update 24 April 2024

We corrected a typographical error in the consultation document. Specifically, we included a question (Q4.2) regarding views on the proposals concerning Chapter 4 - Code Manager Funding and Cost Recovery.

In this joint DESNZ / Ofgem consultation, we set out our initial proposals for code manager standard licence conditions and selection processes.

This follows our previous consultations: 

• in 2019, we set out our desired outcome for energy code reform - an institutional governance framework that is forward-looking, agile, easy to understand, and able to accommodate a growing number of market participants
• our 2021 consultation and response stated our intent to establish a regulatory regime for new ‘code managers’ as licensed bodies who would undertake current code panel and administrator roles
• we also proposed a new strategic role for Ofgem to provide direction for the codes’ development. The code manager licensing arrangements will be designed to ensure that strategic change can be delivered, effectively and efficiently

We are now developing the secondary legislation and regulatory framework for code managers, which will allow Ofgem to implement the reformed framework and drive strategic changes across the codes in the interest of consumers and competition. This consultation covers:

Code manager licence

We set out the proposed high-level contents of the code manager licence, covering these priority areas:

• not-for-profit requirement
• setting budgets
• cost recovery and funding
• incentivisation
• conflicts of interest and independence
• financial and operational controls
• code maintenance and modification

Code manager selection

We set out proposals for the secondary legislation that will underpin Ofgem’s code manager selection process, including:

• who will be eligible for selection
• how Ofgem will determine whether to pursue competitive versus non-competitive selection for each code
• how any non-competitive selection process would work
  

We also set out a view that the proposed selection route criteria – speed of delivery and value for money – may lead Ofgem to pursue non-competitive selection in many cases, such as where a code has not been consolidated and an eligible incumbent body already exists.

The consultation is open to all, but we would specifically like views from:

• existing code parties
• existing code administrators
• wider industry players
• consumer groups
• academics

If responding via email, please copy your response to both the Department for Energy Security and Net Zero and Ofgem:

• codereform@energysecurity.gov.uk
• industrycodes@ofgem.gov.uk

Following the launch of this consultation, DESNZ and Ofgem held a webinar on Tuesday 26 March 2024.

During the event we summarised our key proposals and answered questions on both this joint consultation and also on Ofgem’s separate but related energy code reform: implementation consultation.