Ofgem proposes fixed memberships for code advisory forums

The Stakeholder Advisory Forums that will support code managers in recommending or approving code modifications should have fixed memberships to provide “better institutional memory and expertise”, Ofgem has proposed.

The regulator said the forums should consist of impartial code party representatives and paid independent members, and could include academics and experts who only attend when necessary.

Under the current arrangements, modifications to industry codes are recommended to Ofgem, and sometimes approved, by code panels made up of a combination of elected and appointed members.

As part of a major overhaul of the code governance arrangements, this function will be fulfilled by a new set of licenced code managers, which will additionally propose, prioritise, manage and coordinate code modifications. In doing so, they will also take over the current role of code administrators.

To ensure stakeholders can still provide input to the modification process, code managers will be required to establish Stakeholder Advisory Forums. Although it will not be binding, code managers will be required to give “due regard” to the forums’ advice.

In a call for input in December 2022, Ofgem proposed three potential options for the forums’ composition: open forums that any stakeholder can attend and where participants would not be required to act impartially; fixed memberships, where members would not be required to act impartially but they would each represent the views of a particular constituency; and fixed memberships of stakeholders and independent parties acting impartially.

The regulator has now identified the third of these as its preferred option in a new consultation on the implementation of energy code reforms.

Ofgem said this model would build upon the existing arrangements for code panels of having fixed memberships of impartial code party representatives, plus paid independent members. The regulator said fixed memberships would provide “better institutional memory and expertise” when compared to open forums. It said the forums would have a “wider pool” of members than the current panels, for example, including academics and experts who only attend when they are needed.

The regulator has also set out its initial proposals for developing and delivering the Strategic Direction Statement, through which it will provide guidance to code managers as part of its new strategic oversight role. The annually updated statement will set the direction for the development of energy codes to ensure they reflect the interests of consumers and new technological and commercial developments.

Ofgem’s new statutory obligation to publish the statement does not commence for an individual code until the code has been formally designed by the secretary of state and the regulator has appointed its manager.

Although it has proposed a phased transition of codes to the new governance arrangements and therefore does not expect to expect appoint all code managers at the same time, Ofgem said it would still be beneficial for the Strategic Direction Statement (SDS) to cover “the full code landscape” from the outset: “This will provide opportunities for strategic change to be progressed and co-ordinated under existing governance, as well as enabling incoming code managers to commence their role effectively from ‘day one’.”

The regulator said it plans to consult on the first statement in winter 2024 and publish it in spring 2025.

Ofgem said the statement will focus on the following one or two years but will cover up to a five-year period, depending on the subject matter. It will include a “broad range” of directions: “In many cases, it could identify an issue that requires action and allow industry and code managers to decide how best to respond. In other cases, the SDS may be more prescriptive about the outcomes we expect to be achieved, and/or specify the parameters of required modifications.”

Following the publication of the statement, each code manager will be required to produce a plan for developing their code in line with the statement, with input from their Stakeholder Advisory Forum.

To ensure code managers have the assistance of code parties in implementing the plan, Ofgem has proposed to introduce a new principles-based standard condition to all electricity and gas licences requiring licensees to support the development and delivery of code modifications related to the SDS. It intends to place a similar obligation in the codes themselves to ensure the co-operation of non-licenced code parties.

The latest consultation also includes Ofgem’s proposals for consolidating the current codes. The regulator said it plans to take a “vertical” approach to consolidation, creating two unified electricity codes – one technical and one commercial – and one unified gas network code.

The deadline for responses is 23 April 2024.