Wednesday 17 February 2016

Reforming the energy market codes

The complexity of energy markets are reflected in supporting industry agreements and subsidiary documents – or codes – which ensure market operability.

Codes enable government-driven and consumer-focused initiatives to be implemented as well as provide governance that supports energy companies to ensure there are fair market practices.

Gemserv, a code administrator for more than 15 years, believes codes have performed “extremely well to date” however there are common issues among most energy market participants "due to the unprecedented levels of change".

These are namely around the inaccessibility and the complexity of codes, the lack of consistency within and between codes and the lack of transparency and co-ordination, it states.

It believes there are three main areas invoking “significant” energy market reform: Retail energy market investigation, Ofgem's consultation on code governance and other major reform initiatives being undertaken in parallel such as the smart meter rollout.

Gemserv's new 'Thought Leadership Paper' states: “A strategic approach to code governance is lacking, creating unnecessary market risk and uncertainty. Also lacking is a better and more consistent approach to code standards.”

It sets out proposals to design a sustainable code governance approach that it claims can be implemented within 18 months.

It believes there are five main issues related to current codes: Inaccessible, too complex, inconsistent, non-transparent and uncoordinated.

How can the challenges be addressed?

Gemserv is calling for the formation of a Strategic Body that provides an oversight of code governance and change.

It would build on the existing cross code work group held under the Code Administration Code of Practice (CACoP), reforming it to enable the new body to give advice, set down best practice measure and improve services.

“The aim of the Strategic Body is to drive improved code accessibility and engagement, promote code administration innovation, and secure cross code coordination for the benefit of all market participants (including consumer groups),” the report states.

The CACoP was developed by industry to facilitate convergence and transparency in code modification processes and help protect the interests of small market participants and consumers.

Other suggestions include improved governance for co-ordination, merging codes into either one or multiple codes and allowing Ofgem to raise code modifications and project manage changes.

This is a promoted article.