Decision: market facilitator policy framework

What changed

Ofgem confirmed the policy framework for the Market Facilitator on 4 June 2025, finalising the regime that Elexon was appointed to run in July 2024. The decision covers four blocks: how the Facilitator is set up, the functions it performs, the specific deliverables it owns, and the performance regime it sits under. It is the operative companion to the December 2024 consultation and feeds directly into the September 2025 blueprint decision that takes the regime live.

The structural choice is the one to read. The Facilitator is built as an administrative coordinator of local and national flexibility market arrangements, hosted at Elexon, with licence backing to be added to the Distribution Licence and the NESO ESO Licence. It is not a market operator, not a counterparty, and not a price-setting body. Its remit is to reduce friction between the DNO-run local flexibility markets and NESO's national balancing and ancillary services markets, raise liquidity by standardising the seams between them, and publish the artefacts (common product definitions, registration data, performance information) that participants need to move between venues.

What this means in practice

Flexibility providers, the aggregators stacking distributed assets, and the DNOs procuring local services now know the institutional shape they will operate under for the rest of the decade. The friction the Facilitator targets is real: a battery or a demand-side asset that wants to sell into both a DNO constraint management product and a NESO balancing service today faces different registration regimes, different baselining rules, different settlement timetables, and different dispute routes. Standardising those interfaces lowers the fixed cost of participating in more than one market, which is where the liquidity gain comes from.

The design choice is to deliver that liquidity through administrative harmonisation rather than through a price mechanism that would let flexibility clear across venues on a common signal. Common product definitions, shared asset registration (the Flexibility Market Asset Registration decision sits alongside this one), and published performance data are the levers. There is no central auction, no nodal-style locational price for distributed flexibility, no settlement-level reconciliation between local and national procurement. The Facilitator coordinates the venues; it does not replace them with a market.

Who pays sits in two places. The Facilitator function itself will be funded through the licensed parties carrying the new conditions, which means DNO and NESO cost recovery, which means consumer bills through DUoS and BSUoS. The numbers are not in this decision. The bigger cost question is one the framework deliberately does not answer: how much of the flexibility value chain is left on the table when coordination stops at definitions and registration rather than running through to a price. Procurement decisions stay with the DNOs and NESO, each within their own incentive frameworks, and the bilateral, tendered, contract-led structure of those procurements is preserved.

For DNOs, the deliverables list locks in obligations to publish standardised requirements and to use the Facilitator-defined products. For NESO, the same applies at the national layer. For Elexon, performance arrangements set out how Ofgem judges whether the Facilitator is doing its job, with the regulator retaining the ability to intervene if delivery slips. The licence conditions that translate this into enforceable obligations are still to be consulted on; until they are made, the framework runs on the appointment letter and this decision.

What happens next

Three consequential workstreams follow. First, Ofgem will consult on new licence conditions for the Distribution Licence and the NESO ESO Licence to give the Facilitator regime statutory backing. That consultation is the moment where the operational detail (information-sharing obligations, dispute resolution, cost recovery routes) gets pinned down, and it is the right intervention point for anyone who thinks the administrative-coordinator model is under-specified.

Second, Ofgem will produce and consult on a governance framework document and an impact assessment. The governance document defines how decisions are made within the Facilitator function and how disputes between Elexon, DNOs, NESO and market participants are handled. The impact assessment is where the cost recovery numbers should land; absent that, the consumer bill impact remains an open figure.

Third, the September 2025 blueprint decision builds on this framework to set the operational design under which the Facilitator goes live. Read the two together: this decision sets what the Facilitator is and is not, and the blueprint sets how it runs day to day. The Flexibility Market Asset Registration decision and the wider Future of Local Energy Institutions and Governance work are the adjacent pieces that determine whether the coordination layer the Facilitator provides ends up being enough, or whether the next iteration of the regime has to reach for price-based mechanisms to do what administrative harmonisation cannot.