Elexon to remain in private industry ownership

Elexon, the administrator for the Balancing and Settlement Code (BSC), will be kept in private industry ownership following the creation of the Future System Operator (FSO), the government and Ofgem have confirmed.

They said the not-for-profit company will be jointly owned by the licenced BSC parties that pay the largest share of its monthly costs, with the fallback position being temporary public ownership as a subsidiary of the FSO.

The FSO is due be established as publicly owned corporation by 2024 and will take on all of the main roles of National Grid Electricity System Operator (ESO) as well as some gas planning functions.

Elexon is currently a wholly owned subsidiary of the ESO, which is in turn part of National Grid group. However, Elexon is operationally and financially independent from the ESO, with its own board.

In a consultation launched in July, the government and Ofgem proposed two possible options for the ownership of Elexon following the creation of the FSO – publicly ownership as a subsidiary of the FSO or private industry ownership by some or all of the BSC parties.

Responding to the feedback, they said both options would fulfil their four policy criteria of minimising disruption to work on the BSC, market-wide half-hourly settlement and electricity market reform; avoiding disruption to the delivery of the FSO; preserving Elexon’s independence and accountability to industry stakeholders; and ensuring resilience to future changes, including code reforms.

“In the absence of a clear rational to create a public body and the lack of evidence of a market failure under existing private ownership arrangements,” they said their decision is for Elexon to remain in private industry ownership.

The government and Ofgem said ownership by a subset of BSC parties would be less disruptive than ownership by all of them as the company would have to dedicate fewer resources to establishing and maintaining the ownership structure.

They said Elexon should therefore be owned by its largest licenced funding parties, more specifically, those that contributed more than 2% of its funding over 2022. They said this threshold would include 13 parties, both generators and suppliers, which collectively contributed more than three quarters of company’s funding over the year.

The 13 parties in order of the size of their funding share are:

• EDF
• Eon
• British Gas
• RWE
• SSE
• Orsted
• Scottish Power
• Drax
• Uniper
• Ovo
• Octopus
• Drax
• TotalEnergies

To implement the new ownership arrangements, a new standard licence condition will be introduced for generators and suppliers enabling the government and Ofgem to direct any of the 13 largest BSC funding parties to take a share in Elexon. This will also allow them to maintain the number of mandated shareholders if the initial cohort subsequently reduces in size due to market exits.

As a fallback option, the government and Ofgem said Elexon should be temporarily taken into public ownership as a subsidiary of the FSO if the new ownership arrangements cannot be put in place in time for its creation.