Elizabeth Lawlor, head of governance services at ElectraLink, sets out the company’s proposed approach to reforming code governance
The UK energy market is historically complex which is mirrored within supporting industry codes. Naturally, SmartestEnergy’s opinion piece in October’s New Power, which put forward the creation of a ‘super code administrator’, underlined the true challenges facing today’s market participants; from the inability to navigate across multiple codes’ obligatory requirements to disengagement within code change processes. Accordingly, we propose that these issues form the basis of reform to code governance. We agree with SmartestEnergy that significant change is required to deliver a transparent and manageable governance regime for participants within a competitive market place, but we question whether introducing a ‘super code administrator’ really tackles the pivotal issues of industry parties.
As a central code administrator for over 10 years, we have been appointed a number of roles under competitively procured commercial contracts. We feel strongly that competition across code administration is only a good thing for parties, not least, though driving innovation and best practices across codes. Picking up on SmartestEnergy’s example of suppliers being obligated under Ofgem licences to be party to six electricity codes, we believe the solution is not to push for a single governance structure but rather move away from today’s, largely adopted, blanket approach of market participants complying to all code aspects, despite their market size or trading model. In our experience, new entrants are overburdened with complex code requirements from the onset of market entry which leads to disengagement and, using the words of the Competition and Markets Authority (CMA), ‘stifles competition’.
ElectraLink instead encourages a fresh approach to be taken which provides a more consistent approach to code standards and utilises code administrators’ expertise in the codes they administer.
Through Ofgem working alongside code administrators and code panels, we propose codes are re-structured using a uniform method which enables market participants to comply with code requirements based on their:
- Trading model (eg domestic, non-domestic or prepayment meter customers); and
- Market size (eg the number of registered customers).
The benefits of this approach are that code requirements for a market participant are serving, simplified and sympathetic to its market position. Secondly, administrators can issue change or meeting information only of relevance to parties dependent on their code compliance requirements, reducing documentation burden.
This principal is built upon existing industry arrangements, such as the approach taken to compliance to the Green Deal initiative where suppliers are only obligated to comply to the Green Deal Arrangements Agreement (GDAA) where it supplies over 250,000 customers directly or collectively with its affiliates. Similarly, under the Supply Point Administration Agreement (SPAA), due to its evolution and embedding of contracts over time (which impact a variety of market participants), its schedules are designated as mandatory, elective or voluntary dependent on its scope and impacts to a party.
Using CACoP as the founding document for shaping this future model of code governance, we believe change can be delivered to promote code compliance which is sympathetic to a growing and diverse market.
More discussion and comment on industry codes: