Consultation on connection reform (TM04+) enablers, including a statutory consultation on modifications to licence conditions

What this is about

Ofgem is consulting on the TMO4+ package: the operational machinery needed to switch the GB connections queue from "first come, first served" to "first ready and needed, first served." This is the second half of a job that started with the November 2024 policy consultation on licence changes. That earlier round established the principle. This round is about whether the wiring actually carries the current.

The package has four moving parts, published together because they only make sense together. First, code modifications to the CUSC (CMP434 and CMP435) and to the STC (CM095) that rewrite how NESO and the transmission owners process connection applications and re-evaluate the existing contracted background. Second, three methodologies that sit underneath the codes: the Connections Network Design Methodology, the Project Designation Methodology, and the Gate 2 Methodology. Third, a statutory consultation on consequential licence changes to the System Operator, Electricity Transmission, and Electricity Distribution licences. Fourth, an impact assessment that puts numbers against the reforms.

The reason it lands now is that the existing queue contains roughly 700 GW of contracted capacity against system needs of a fraction of that, and the queue is not self-clearing. NESO and Ofgem need the legal instruments in place before they can run the Gate 2 to Whole Queue Exercise that strips out projects that fail "ready" or "needed" criteria. Without these code, methodology, and licence changes, the policy framework announced last year has no operational form.

Options on the table

The consultation is structured around three minded-to decisions and one statutory licence package. Each is a distinct option in the sense that respondents can support, oppose, or propose alternatives, but they are not mutually exclusive. They are layers of the same reform.

Code modifications: CUSC CMP434, CMP435 and STC CM095

The CUSC changes do two things. CMP434 rewrites the connection application process to embed the new Gate 1 and Gate 2 framework, so that progression through the queue requires meeting criteria rather than just holding a slot. CMP435 applies the Gate 2 criteria retrospectively to the existing contracted background, which is the legal basis for terminating contracts held by projects that cannot demonstrate readiness. CM095 is the STC mirror, governing the relationship between NESO and the transmission owners as they execute the reassessment.

The winners are projects that can credibly demonstrate land rights, planning progress, and financial commitment. They move up the queue without having to outbid speculative holders for the same capacity. The losers are projects holding queue positions as free options on future capacity, particularly those that have used a queue slot to support a planning case or an investor narrative without progressing the underlying development. The transmission owners benefit operationally because they can plan reinforcement against a queue that reflects probable demand rather than aspirational demand. Consumers benefit if the reinforcement that gets built is the reinforcement that is actually needed.

Connections Network Design Methodology

This is the rulebook for how NESO and the TOs decide what network is needed to accommodate connecting parties. The minded-to position is that network design moves from a reactive, application-by-application process to a forward-looking process anchored on the Strategic Spatial Energy Plan and the Centralised Strategic Network Plan. Connections that fit the strategic plan are easier to accommodate. Connections that do not are harder to accommodate, and may not be offered at all in their requested location.

Winners are projects whose location and technology align with the strategic plan, including offshore wind in designated zones, batteries co-located with constraint boundaries, and demand at strategic load centres. Losers are projects whose location requires bespoke reinforcement that the strategic plan does not anticipate. Hyperscale data centres in locations far from the strategic plan's assumed load growth will find this consultation matters to them more than they expect.

Project Designation Methodology

This sets out how a project earns "needed" status. The minded-to position uses a combination of strategic plan alignment, technology need at the location, and the project's ability to contribute to system needs identified by NESO. Designation is the gateway to connection offers under the new framework. Without designation, a project cannot progress.

The winners are projects whose technology and location match the strategic plan's identified needs, particularly storage, flexibility, and low-carbon dispatchable capacity at constrained nodes. The losers are projects offering capacity that the system does not need at the location requested. A solar project at the back of a queue in a saturated export region cannot become needed by waiting longer. The methodology forces an explicit "no" rather than the implicit "maybe in 2032" that the current process produces.

Gate 2 Methodology

This is the criteria document. Gate 2 is the readiness test: land rights, planning consent or credible application, financial commitment, and project milestones. The minded-to methodology sets specific evidence requirements for each, with weight and scoring. Projects that fail Gate 2 do not progress, and under CMP435 existing contracted projects that cannot meet Gate 2 lose their position.

Winners are well-funded developers with land and planning sorted. Losers are speculative developers, optionality plays, and projects that secured a queue slot before doing the development work. There is a secondary effect on the M&A market: queue positions held by developers who cannot meet Gate 2 lose value, but queue positions held by developers who can meet Gate 2 may gain value because the queue ahead of them gets shorter.

Statutory licence changes

The licence package covers the System Operator licence (Annex A), the consolidated Electricity Transmission standard licence (Annex B), and the Electricity Distribution standard licence (Annex C). The changes give NESO the express duties needed to run the new framework, give the TOs corresponding obligations on network design and offer processes, and give DNOs the framework changes needed for the distribution-level applications.

The licence changes are mechanical in the sense that they enable the policy rather than set it. But the precise drafting determines NESO's discretion in close cases, the TOs' grounds for refusing or delaying offers, and the DNOs' ability to manage their own queues consistently with the transmission process. Industry parties read these tracked changes for the boundaries of regulatory discretion that will frame the next decade of connection decisions.

Questions being asked

Ofgem has not published a single numbered question list in the headline document; the questions are distributed across the main consultation, the three methodology minded-to decisions, and the statutory licence consultation. The themes are clear.

Code modifications

Questions on whether CMP434 and CMP435 deliver the policy intent, whether the drafting is workable, and whether the cut-over arrangements protect projects mid-application. Questions on whether CM095 gives the TOs and NESO the clarity they need to execute the reassessment without bilateral disputes.

Network design methodology

Questions on whether the proposed methodology gives sufficient weight to the Strategic Spatial Energy Plan and CSNP, whether the alignment criteria are robust, and whether there are appeal or review mechanisms for projects that believe they have been wrongly excluded. (The real question is how much NESO discretion is acceptable to industry. Too much and the methodology becomes opaque; too little and it cannot accommodate unforeseen needs.)

Project designation methodology

Questions on whether the designation criteria capture system needs accurately, whether the technology categories are appropriate, and whether the location-specific weights are sound. Specific questions on how data centres, hydrogen electrolysers, and other large emerging loads are treated. (This is the part of the consultation where the assumptions about future demand growth get embedded.)

Gate 2 criteria

Questions on the evidence thresholds for each criterion: land, planning, financial commitment, and milestones. Questions on whether the criteria are calibrated for different technologies. Questions on the treatment of projects with partial progress, for example land secured but planning application not yet submitted. (The drafting here determines whether the queue clears or whether it gets re-litigated through appeals.)

Statutory licence changes

Questions on whether the licence drafting matches the policy intent, whether the duties on NESO are clear, whether the TO obligations are deliverable, and whether the DNO framework is consistent with the transmission-level changes. Questions on the timing and sequencing of licence change implementation against the code modification effective dates.

Impact assessment

Questions on the assumptions behind the cost-benefit analysis, the modelled queue clearance rates, the consumer benefit projections, and the network build savings. (The IA is the document that will be cited in any future judicial review of the package, so the assumptions matter beyond this consultation.)

Cross-cutting

Questions on the interaction between the TMO4+ package and adjacent reforms: REMA, the CSNP, the SSEP, and the ongoing CUSC and STC modifications in flight. Questions on transitional arrangements for projects currently in the application or offer stage.

How to respond

The consultation closed on 15 March 2025.

Responses by email to connections@ofgem.gov.uk, in PDF format. Ofgem published two response templates on 10 March 2025: a licence changes template and a TMO4+ package of reforms template. Respondents were asked to use these where possible.

The consultation has since closed with a decision: Ofgem published the Decision on Connections Reform Package (TM04+), which is the document operators should now read for the binding position rather than this consultation.