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On 6 March 2026, Ofgem published its decision on its second consultation on the implementation of energy code reform, which set out proposals to modernise Great Britain's regulatory energy codes. Phase 1 of the reform is expected to be implemented by the end of 2026.
Central to energy code reform are Ofgem's new powers under the Energy Act 2023 (EA 2023) to appoint and license code managers. Code managers will assume roles previously fulfilled by code panels and administrators, ensuring that industry codes evolve in line with Ofgem's annually published Strategic Direction Statement (SDS). The additional introduction of new Stakeholder Advisory Forums (SAF) will allow industry stakeholders to more actively contribute to the decision-making process.
Ofgem's recent decision is part of a broader joint programme of reform by Ofgem and government. Collectively, these measures aim to create a more streamlined approach, that better aligns governance with the evolving energy sector's dynamic needs and consolidates the current codes to ensure easier market participant compliance.
Transition to new governance framework
Milestones across all three phases include:
- appointing code managers;
- preparing the code manager standard licence conditions and baseline code text to be used;
- making specific code, licence and contract modifications needed to transition the codes in line with SDSs (yet to be published);
- reviewing dependencies across related programmes; and
- (for Phase 2 and 3 only) consolidating governance and contractual provisions across the ECC, GNC and ETC.
In Phase 1, the BSC and REC will not be consolidated. Ofgem proposes for Elexon Limited and Retail Energy Code Company Limited to become the code managers for the BSC and REC respectively following its March 2025 decisions to follow a non-competitive selection process for such code managers.
As decided in its 2024 consultation decision, Ofgem will pursue code consolidation to establish the ECC and GNC (both in Phase 2) and the ETC (in Phase 3). Detailed plans for Phase 2 and Phase 3 will be shared later, in line with future SDSs to be published. Ofgem will use lessons learned from Phase 1 to shape the sequencing and delivery of Phases 2 and 3, ensuring the transition remains aligned with wider reform objectives. The initial code consolidations led by Ofgem are expected to be limited in scope, with further changes to rationalise and simplify the codes led by code managers in the longer-term.
Ofgem has informed stakeholders that, to achieve consolidation, it will work closely with industry stakeholders to run code consolidation workgroups (CCWs) to gather views and identify risks, then draft code changes, consult on them and potentially refine them further before implementation (expressions of interests to join the CCWs, and Ofgem's consultation on the code modification text, are invited until 17 April 2026). Such workgroups are to begin in Summer 2026.
Future code modification process
Stage 1 - Pre Modification Process
A non-mandatory pre modification forum, chaired by the code manager, will enable early rejection of unclear, duplicative or out of scope proposals while avoiding unnecessary process where proposals are already well developed.
Stage 2 - Raising a Modification Proposal
Access to raising modification proposals will be widened beyond code parties. In addition to code parties and Ofgem, statutory consumer bodies, other code managers (for cross code changes) and designated non code parties may raise proposals. Designation of non-code parties will be subject to triage criteria, input from the SAF and appeal rights to Ofgem.
Stage 3 - Assessment of Modification Proposals
Code managers will use consistent criteria to assess proposals, being examined for materiality (whether they require Ofgem consent, self-governance or fast track self-governance) and prioritisation. Appeal routes to Ofgem will exist upon a proposal's refusal.
Stage 4 - Industry Consideration
The default approach is a single consultation per modification, although additional consultations may be conducted if required. Alternative modifications may be proposed where they offer demonstrable improvements.
Stage 5 – Consultation
The code manager will draft a consultation report, ensuring that the SAF's views are clearly reflected. It will outline the assessment, workgroup discussions, and the reasons for decisions made.
Stage 6 - Recommendation to Ofgem / Self Governance Decision
The code manager will produce the final report, which will either seek Ofgem consent or finalise a self-governance decision. Ofgem will retain a "send back" power where reports are inadequate.
Stakeholder Advisory Forum (SAF)
Stakeholders have reacted positively to Ofgem's proposal of SAFs acting as an accountability mechanism within the reformed code governance framework. SAFs are designed to scrutinise code managers' decisions while ensuring alignment with consumer outcomes and Ofgem's SDS.
SAF objectives
To anchor the new SAF role, Ofgem will introduce explicit SAF objectives into the codes, requiring the SAF:
- to act efficiently, economically and expeditiously;
- to promote achievement of the relevant code objectives;
- to ensure codes are applied without undue discrimination; and
SAF membership
Each SAF must include at least one independent member and be chaired by an independent chair appointed by the code manager. Independence requirements will exclude recent code parties and those with professional or personal links to the code manager.
SAFs will also include code party representatives, to provide technical and operational expertise, and up to two statutory consumer advocates. Ofgem has also moved away from a fixed cap on independent members, instead determining appropriate numbers on a code‑by‑code basis.
Members will serve three‑year terms, renewable up to two consecutive terms, with staggered initial appointments to maintain continuity.
SAF contributions to modification proposals
Operationally, the SAF will be required to vote on modification proposals and to advise on key code manager decisions, including refusals of modifications. While the SAF's role is advisory, not determinative, code managers must clearly explain how SAF views have been considered, reinforcing transparency and confidence in the reformed modification process.
Cost recovery
Ofgem has confirmed it will retain the existing cost recovery methodologies for the BSC and REC, as they are transparent and non-disruptive to competition.
Regarding cost recovery methodologies for the other codes, Ofgem have confirmed that they are reviewing cost recovery methodologies on a code-by-code basis. Initial Ofgem proposals can be viewed in the Final Impact Assessment from August 2024.
Directing central system delivery bodies
The EA 2023 gives Ofgem statutory powers to issue directions to the bodies responsible for operating central system delivery bodies (CSDBs). CSDBs will play a key role in supporting the implementation of code changes, including by delivering required changes to central systems and coordinating those changes with wider system developments.
Ofgem's direction powers are intended to ensure that CSDBs will act in support of effective code governance and market operation. Ofgem's decision sets out its process for issuing such directions.
Next steps
The proposed changes mark a significant shift in the rules governing Great Britain's gas and electricity industries. Industry participants should benefit from faster, more consistent and streamlined processes but will need to evaluate the implications of the new codes as code reform continues to progress, including the actions they need to take to prepare for implementation and ensuring that they understand the new role of the code manager and the ways in which stakeholders can input into the new governance arrangements.
Please do not hesitate to contact us if you would like to discuss the proposed reforms and their potential impacts.
This article was prepared with the assistance of trainee Jonny Fox.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
