Responses to our initial consultation on the code governance remedies June 2017
Content • Background • Our proposals • Consultation • Our questions • Dominant views received • Next steps 2
Background Context • November 2016: Industry Code Governance: Initial consultation on implementing the Competition and Markets Authority’s recommendations • January 2017: workshop • February 2017: consultation closed • May 2017: published responses to enable stakeholder engagement Our consultation • Scope of the new arrangements • Licensing and competition • Strategic direction Work streams • Consultative board • Moving to the new arrangements Responses • 41 submissions in total • From a wide range of respondents, including: code administrators, code panels, code bodies, large and medium-small suppliers, electricity and gas DNOs, Electricity and gas generators, representatives of the renewables industry, professional and industry associations, a consumer body, etc. 3
Scope of the new arrangements We proposed We asked They said • New arrangements to • Should the scope be • The majority of the include CACOP codes and broader or narrower? respondents agreed with the central system delivery the codes and functions • Are there any other factors functions we have identified to consider? • Factors to be considered • Some suggested to include: for the scope: • all codes (including - accountability, upcoming ones), - strategic change, • Data Transfer Service - volume and scale of (DTS), and change, • Security and Quality of - scope of code Supply Standard (SQSS) • Associated costs were mentioned by most as other factor to be considered 4
Licensing and competition We proposed We asked They said • Include code manager and • Should we include the • Majority do not support delivery body functions in code manager and delivery licensing a single licence, because of body function in a single • Most respondents the synergies between licence? supported including a code them • Should we strengthen the manager and delivery body • There may be merits in licence of NGET to include in a single licence - as long building the new code new code management as it is done on a case-by- management requirements? case basis responsibilities of NGET on • Respondents were fairly existing conditions evenly split regarding (through the electricity whether or not to transmission licences) strengthen NGET’s licence instead of competitively appointing a new code manager 5
Licensing and competition We proposed We asked They said • 4 licensing models: • What are the merits and • Respondents questioned - licensing drawbacks of the different the benefits case for precedes/follows models? competitive tendering tendering • Which model(s) may be • Most respondents would - tendering is done by appropriate for different prefer Ofgem running the Ofgem/another body codes/type of codes? tenders, issuing licences to • Models have different the winners strengths and weaknesses • Few respondents and may be better suited expressed their opinion on to some codes than others which model may be appropriate for different codes; the majority of those would prefer consistency 6
Strategic direction We proposed We asked They said • The strategic direction should • Do you agree with the purpose • Wide support for the strategic direction, but it should be set out, on an ongoing basis, of the strategic direction? consulted upon outcomes Ofgem is aiming to • How do you think we should • Development: consultation is key achieve through changes to develop and implement it? industry codes • Implementation: importance of • Which Ofgem projects should the delivery framework • It should contain: be included in the strategic underlined - key outcomes to be delivered, direction? • Most respondents agreed with - roles and responsibilities, • How much detail would be the projects we suggested, a few - ‘vision’ of cross -code reform, appropriate? recommended including Security - explanation of our priorities of Supply, ECO reform, Priority • List of activities and projects to Services Register and Extending be included in the strategic Competition in Electricity direction Transmission • Three stage development: • The strategic direction should be - establishing the content and clear on what needs to be the level of detail required achieved but not restrict how to do it - defining the responsibilities - developing incentives and • Longer term Ofgem projects (+5 years) should be included, at least accountabilities 7 at a high level
Consultative board We proposed We asked They said • The key purpose of the • What should be the core • Respondents generally consultative board should role and functions of the support for the creation of be coordinating and consultative board? a consultative board facilitating the delivery of • A secretariat may be strategic changes across needed codes • The consultative board • List of possible functions for should have powers so it the board can operate effectively • The consultative board • The consultative board should be capable of could proactively seek to making non-binding spot gaps and overlaps recommendations to us • Respondents also flagged • Market participants, code that the composition and panels, code managers and funding of the consultative delivery bodies should have board are major issues to an obligation to provide be decided on 8 information to the board
Moving to new arrangements We proposed We asked They said • The reforms are unlikely to • How would moving to the • The system is already affect the governance of new arrangements impact stretched; moving to the major projects and existing projects? new system will add work programmes (eg. switching so lead to delays with • Will SCR powers be programme, half-hourly current projects obsolete once the new settlement) arrangements are • Opinions are fairly evenly • Significant Code Review operational? divided on whether SCR powers are unlikely to be powers will remain • What are your views on required once the full necessary staggering the package of remedies is in implementation of • The majority of the place competitive applications respondents who provided • Pros&cons for a staggered for licences? a view on staggering were approach to run in favour of it competitive licence applications 9
Next steps Open letter We plan to publish an open letter in June / July. This is to include: • a summary of the responses received to our initial consultation, and • an update on our next steps in developing the policy. Strategic direction and consultative board During the summer we will focus on these two work streams: • we will develop the strategic direction and the consultative board, taking into account the consultation responses, and • we will engage stakeholders on latest thinking. Licensing We need legislation to progress with the licensing work stream. We await indication from new government of legislative priorities. 10
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