Gas and electricity licences require the establishment of industry codes which set out the detailed rules that underpin operation of the market and terms for connection and access to energy networks. Some alterations to these codes require Ofgem's consent.
Challenges to Ofgem code decisions can be undertaken in two ways; either by judicial review or by an appeal to the Competition Commission under the Energy Act 2004.
The Competition Commission appoints members of the panel responsible for determining code appeals. These members can be anyone the Competition Commission believes has sufficient knowledge of the subject matter of the case and who is available for the duration of the appeal.
There have been four challenges in the last five years to the Gas and Electricity Markets Authority's (GEMA's) decisions concerning the industry codes. Two of these were by way of appeals to the Competition Commission under section 173 of the Energy Act 2004 and two by way of judicial review.
Utilita Electricity Limited lodged an appeal on 13 April 2006 with regard to Ofgem's decision on a modification proposal to the Balance and Settlement Code PI94: Revised Derivation of the ‘Main’ Energy Imbalance Price. Utilita withdrew its appeal on 4 May 2006.
E.ON UK plc lodged an appeal on 30 April 2007 with regards to Ofgem's decision on a modification proposal to the Uniform Network Code: UNC 116: Reform of NTS Offtake Arrangements. The appeal was upheld in part.
Drax Power Limited, Scottish Power Generation Limited and Teesside Power Limited sought a judicial review in 2003 of the Authority's decision on a modification proposal to the Balance and Settlement Code: P82: Introduction of zonal transmission losses on an average basis. Ofgem's decision was quashed.
Certain industry parties applied on 10 December 2007 for judicial review of a relatively recent decision of GEMA's concerning proposals to modify one of the industry codes, namely the Balancing and Settlement Code.
The industry codes are subject to modification change proposals that are presented to Ofgem for a decision. Each code has its own set of modification rules which are presided over by a code modification panel.
Since the inception of the codes, Ofgem has frequently initiated policy projects aimed at reviewing or reforming aspects of the gas and electricity market and trading arrangements. In many cases, these projects have impacts on particular areas of the codes. Examples of such projects include reviews of the new electricity trading arrangements in 2002, the new gas trading arrangements in 2000 and the current transmission access and electricity cash-out reviews.
Ofgem is also currently in the process of initiating an industry wide code governance review. This review is considering among other things the role and treatment of environmental issues within the codes framework.
Over 1,200 modifications have been received by Ofgem over the last five years. Of these Ofgem directed the implementation of 869 across all the industry codes. For the more significant codes, the breakdown is as follows:
Code Decisions Accepted Network code 143 94 Uniform network code 157 101 Balance and settlement code 112 62 Connection and use of system code 105 86
Details of the changes can be found on the following web pages:
Network code
http://www.gasgovernance.com/Code/TranscoNetwork CodeArchive/Mods/
Uniform network code
http://www.gasgovernance.com/Code/Modifications/
Balance and settlement code
http://www.elexon.co.uk/changeimplementation/ModificationProcess/modificationdocumentation/default.aspx
Connection and use of system code
http://www.nationalgrid.com/uk/Electricity/Codes/system code/amendments/