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Changes to governance codes should foster self-regulation, says Ofgem The energy industry is braced for a welter of code modifications over the spring and summer after Ofgem decided to press ahead with major reforms to existing governance arrangements. At issue are significant changes to the codes - the contractual arrangements that underpin the energy wholesale and retail markets and which define the terms of access to the electricity and gas networks. The shake-up of the current arrangements will mean that the regulator will for the first time be able to instigate "significant code reviews". Until now, code changes had to be proposed by the industry. Ofgem has argued that the existing arrangements, while they work well for incremental code modifications, are ineffective in supporting large-scale and more complex change, and had resulted in significant "consumer detriment". The regulator claimed that this was of the order of £100 million. Although Ofgem will be able to initiate code changes, it plans to "step away" from code modifications "that have minimal customer impact". The shake-up will create a greater role for self-regulation in the industry. Under the new arrangements, charging methodologies will become the subject of review under the governance regime and affected parties will for the first time have the right to raise proposals to modify those methodologies. Ofgem has started consulting on the code of practice that will underpin many of the changes and expects to issue a series of statutory consultations on licence changes by late May. Source: Utility Week © Faversham House Group Ltd 2010. News articles may be copied or forwarded
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