Elexon emphasises the importance of whole-system approach for Reformed National Pricing

What this is about

Elexon, the body that administers the Balancing and Settlement Code and runs GB electricity settlement, has published a positioning statement on Reformed National Pricing — the programme formerly known as zonal pricing or locational pricing reform. The statement calls for a "whole-system, data-driven approach" to introducing locational signals into electricity pricing, arguing that reform cannot be confined to transmission charging alone but must be coordinated across settlement, charging, and dispatch.

This matters because Elexon is not a commentator — it is the organisation that would have to implement any change to how imbalance prices are calculated and how generators and suppliers are settled. If locational signals are introduced into TNUoS charging but not reflected in imbalance settlement, the price signals will contradict each other: a generator in a congested zone would face higher transmission charges but the same imbalance price as a generator in an uncongested zone. Elexon is flagging, correctly, that half-built locational pricing is worse than none at all.

Key points

The "whole-system" framing is doing two things at once. On one level, it is a legitimate architectural point: locational signals need to be consistent across the stack — transmission charges, distribution charges, imbalance settlement, dispatch, and capacity market signals. If they are not aligned, participants will arbitrage the gaps and the reform will produce perverse outcomes. On another level, "whole-system" is a phrase that has historically been used to expand scope until a reform becomes too complex to deliver. Every additional system that must be coordinated is another dependency, another consultation, another reason to delay.

No new mechanism or timeline is proposed. This is a positioning statement, not a modification proposal or a consultation response. Elexon is not putting forward a specific design for locational imbalance pricing. It is asserting its relevance to the debate and signalling that any reform that bypasses settlement will be incomplete.

The data point is implicit but important. Elexon settles every half-hour of every day across the entire GB market. It holds the most granular dataset on who generated what, where, and when, and what imbalance costs resulted. If Reformed National Pricing is to be "data-driven" — as Elexon argues — then Elexon's settlement data is the dataset. This is Elexon positioning itself as indispensable to the reform process, which it probably is.

The gap between Elexon's framing and Ofgem's trajectory. Ofgem's Review of Electricity Market Arrangements (REMA) has been narrowing toward a nodal or zonal pricing model for wholesale markets, with separate workstreams on transmission charging reform (the Transmission Charging Review). Elexon's intervention implicitly challenges the idea that these can proceed on separate tracks. If Ofgem introduces locational wholesale prices but leaves BSC settlement untouched, the settlement system will still net imbalances nationally — undermining the locational signal. Elexon is right about this, but the practical consequence is that reform becomes a larger, slower, more interdependent programme.

"Whole-system" as a transaction cost problem. The more systems that must change simultaneously, the higher the coordination costs and the longer the timeline. This is not an argument against coordination — it is a warning that scope expansion has a price. Every additional interface that must be redesigned is another year of industry consultation, another set of code modifications, another round of system testing. The question is whether Ofgem treats Elexon's point as a design constraint to be solved or as evidence that reform is too hard to attempt.

What happens next

No immediate regulatory action flows from this statement. It is a public positioning piece, not a formal BSC modification or a consultation response with a deadline.

Watch for Elexon's engagement with REMA. The substantive test is whether Elexon translates this framing into specific BSC modification proposals — for example, a proposal to introduce zonal imbalance pricing or to reform the way cash-out prices are calculated to reflect locational costs. Until that happens, this remains a statement of intent.

Ofgem's Transmission Charging Review and REMA convergence. The two workstreams are on overlapping timelines. Ofgem published its REMA second consultation in late 2025 and is expected to make design decisions through 2026. If Ofgem opts for any form of locational pricing, Elexon's point becomes operationally urgent: settlement systems will need to change, and Elexon will need lead time to design, consult on, and implement those changes.

The risk is sequencing. If Ofgem decides on locational wholesale pricing first and addresses settlement later, there will be a period where price signals and settlement rules are misaligned. Elexon is trying to prevent that by arguing for coordinated design now. Whether Ofgem listens depends on whether it views Elexon's whole-system framing as engineering reality or institutional scope creep.