Energy code reform: second implementation consultation

What changed

Ofgem has issued decisions on the second implementation consultation for energy code reform, published 3 April 2025 and concluded with decisions on 6 March 2026. The decisions cover seven areas: the future code modification process, stakeholder advisory forums (SAFs), cross-cutting consequential code changes, BSC and REC cost recovery, directing central system delivery bodies, implementation and assurance, and the transition plan. These are the operative rules that turn the Energy Act 2023 framework into a working code-governance regime, under which licensed code managers replace today's industry-owned code panels.

Ofgem characterises the response as broadly supportive. The substance is in the detail: how a modification proceeds from raising to decision, who sits on the SAFs that scrutinise modifications, how consequential changes that cut across multiple codes are handled, and how the costs of the BSC and REC code-manager regimes are recovered from licensees and ultimately consumers. Ofgem has also opened a further consultation on draft template code text for the new modification process and SAFs, meaning the wording that will actually sit in licensed code-manager codes is still in play.

What this means in practice

This is the wiring layer. None of these decisions changes a strike price, a charge, or a connection date directly. What they change is the governance machinery that determines how every future change to BSC, REC, CUSC, the Grid Code, the SQSS, the STC, UNC, iGT UNC, DCUSA, the SEC and the Distribution Code is initiated, scrutinised, costed and approved. Get the wiring wrong and structural reform downstream becomes harder, slower, or capturable.

Three threads matter to track:

Modification process and SAFs. Today's code-modification regime is administered by panels populated by code parties, with Ofgem as final decision-maker on most changes. Under the new framework, licensed code managers run the process under Ofgem's strategic direction, with SAFs providing the structured stakeholder input that workgroups currently provide. The design choices here, who can raise modifications, what evidence is required, how SAFs are constituted, what role smaller parties have, determine whether the new regime lowers the transaction cost of changing the rules or raises it. The current system's complexity is itself a barrier to entry; a reform that streamlines it for incumbents while leaving entrants outside the SAF tent would entrench rather than open the codes.

Cost recovery for BSC and REC. The BSC underpins electricity wholesale settlement; the REC underpins retail switching and metering. Both are large operations with significant central system costs. The decision on how the code-manager regime is funded determines whether costs sit visibly with the parties that cause them, on Ofgem's books as a regulatory levy, or are socialised through supplier charges that reach consumers indirectly. The cost-recovery design is also a barrier-to-entry question: high fixed annual fees fall hardest on smaller suppliers and new entrants.

Cross-cutting consequential changes. When one code changes in a way that requires consequential edits to others (and that is most changes worth making), the current regime is slow because each code panel runs its own process. The decisions here govern how Ofgem can direct synchronised changes across codes. This is the mechanism that makes structural reforms like MHHS, locational pricing, or connection reform implementable on a reasonable timetable rather than gummed up in years of code-by-code sequencing.

What does not yet exist in the public materials: a clear "who pays" figure for the BSC and REC cost-recovery decisions, or the per-licensee impact. That detail sits in the 803KB decision PDF and the response pack, and will need pulling out before the cost line in the analysis is filled in.

What happens next

Three live workstreams flow from this:

1. Template code text consultation. Ofgem is now consulting on the draft template wording for the new code modification process and SAFs. This is the language that will sit in licensed code-manager codes. Drafting choices here lock in the process design for the next decade.

2. Code manager selection. The "code manager selection guidance" referenced in the decision is the operational document for the next stage: who gets licensed as code manager for which codes, on what terms, and against what performance regime. Selection drives a lot of the practical outcome.

3. Phase 1 consequential change workgroups. Ofgem has opened expressions of interest for the Phase 1 workgroups that will handle the first wave of consequential code changes under the new regime. Membership of these workgroups is itself a structural choice: who is in the room when the first cross-code changes are made sets the precedent.

Watch for the Phase 1 workgroup membership list, the response to the template code text consultation, and the eventual licensing decisions for individual code managers. Those are the three points at which the abstract decisions in this consultation become operative rules.