The new Retail Energy Code (REC) combining elements of both the Meter Registration Agreement and Supply Point Administration Agreement is expected to be introduced in April 2021, Ofgem has revealed in a new consultation.
The regulator said it plans to launch a significant code review in the autumn to establish what changes will be needed to existing codes and licences to implement the REC.
The consultation outlines its proposed setup for the company in charge of operating the REC, for which an interim board has already been appointed. Ofgem said it intends to create a nominations committee, including members of the interim board, to select their permanent replacements.
The board will be required to present an annual report to Ofgem explaining its actions over the previous 12 months and its plans for the following year. It will be accountable to REC parties whose approval will be necessary to pass budgets and associated business plans. Failure to meet their expectations could be reflected in board members’ pay and in extreme cases the REC company may instigate their removal.
The company’s executive functions will be carried by the REC manager which, among other things, will be responsible for administering the code change process, providing support to concerned parties and collaborating with other code administrators.
Ofgem said it will be up to the board to determine how these functions are fulfilled: “We envisage that in the early days, at least, this may be a number of functions contracted from one or more service providers, though REC may also opt to provide some function in-house, dependent upon what is the most effective, economic and efficient.”
The board will also appoint the REC panel, which will be responsible for reaching decisions on proposed code modifications or making recommendations to Ofgem where appropriate. Ofgem said independent members of the panel should be sufficient in number or have enough voting rights to ensure decisions do not go against consumers’ interests. Panel members from the energy industry should also reflect all categories of REC party to make sure their interests are properly represented.
The ability to raise changes to industry codes is typically restricted to signatories. But as it will be a “consumer-centric code, with potential to provide governance for market activities beyond those of traditional licensees”, Ofgem has removed this rule for the REC.
The modification process can often take a long time because it is “heavily reliant upon the input of incumbent parties, whose interests may or may not be aligned with those of the proposer.” Ofgem said the REC will therefore take a much more proactive role in the development of proposals than the administrators for existing codes. This could include enlisting external support from legal, technical or economic experts.
The regulator has also proposed the creation of a performance assurance board (PAB) to ensure that REC parties comply with the code and impose penalties or other sanctions if they fail to rectify their actions. The regulator said it expects members of the PAB to be recruited by the REC manager and then appointed by the REC board.
“The greatest challenge to custom and practice may come from outside of the energy industry,” it added. “We therefore consider that a number of people on the PAB should be recruited from other sectors, which nonetheless face similar challenges with respect to customer service and delivery.”
The REC will be a key enabler of Ofgem’s switching programme which aims to introduce next-day switching between energy suppliers. It is also expected to act as a blueprint for reforms to other industry codes, which are undergoing a review by Ofgem and the government.