The upcoming review of network codes will examine whether they must continue to be all embracing and if a move to a more risk-based approach is required.
The review, announced by Business, Energy and Industrial Strategy (BEIS) secretary of state Greg Clark in his Institute of Directors speech last month, is being carried out jointly by Ofgem and the department.
A document setting out the terms of reference for the “comprehensive” review, published on Tuesday (18 December), says it will consider the purpose, content and governance of the code system.
The review will examine whether a code system is still appropriate for “all the areas of rules in the energy system”, and the scope for handling some elements differently.
For example, it says that commercial contracts or consumer protection legislation could be used instead of codes.
The review will also explore how a more risk-based approach, like that seen in other regulated industries, may be applied to energy and whether the process of changing codes can become more forward-looking.
Stakeholders will also be consulted on whether the content of codes is up-to-date, relevant and applicable, and whether and how it may be improved.
The effectiveness of the current industry governance arrangements will be assessed and whether alternative models might be more effective than the status quo.
And the exercise will consider how any transition from the current system can be smooth.
It is designed to address concerns that the existing apparatus of codes is too slow to take decisions, fragmented, not forward-looking in preparing the energy system for future changes, overly complex, and a barrier to new entrants and innovation.
The document says there is a “growing industry consensus” that action is needed to create a regulatory framework capable of delivering the changes required to move to a clean, smart, and consumer led energy system.
BEIS says it will be holding a series of workshops and webinars with stakeholders in February and the consultation is timetabled for completion by next summer.
John Spurgeon, head of regulation at the Energy Networks Association, said: “As we move towards a smarter, more flexible and cleaner energy system, the way we govern Britain’s energy networks will need to adapt to that.
“The current system has been hugely successful at driving forward higher levels of reliability whilst allowing networks to connect record levels of renewable generation, improve network performance and reduce costs for the public.
“But it’s important to ensure that governance moves with the times so networks can continue to deliver those kind of outcomes. We look forward to working with BEIS closely as part of that.”