IGT165 Uniform Network Code (UNC) proposed changes

What changed

Ofgem has rejected IGT165, a modification to the Independent Gas Transporter Uniform Network Code proposed by OVO Energy in September 2025. The modification would have created two new features on IGT networks: an Independent Shrinkage Expert (a dedicated role to measure and monitor gas losses) and an Independent Shrinkage Charge (a new levy on shippers to fund shrinkage reduction). The decision letter was published on 15 April 2026. The rejection is final — there is no implementation date because nothing changes.

What this means in practice

The existing shrinkage arrangements on IGT networks remain exactly as they are. Shippers using IGT-connected supply points will not face a new charge. IGT operators will not be required to appoint an Independent Shrinkage Expert or meet any new obligations around measuring or reducing gas losses on their pipes.

The proposal had a defensible instinct behind it. Gas shrinkage — the difference between gas entering a network and gas delivered to consumers — is a real physical loss with a real emissions cost. On the large Gas Distribution Networks (GDNs) operated by Cadent, SGN, NGN, and Wales & West, shrinkage is already managed through established mechanisms under the main UNC, with shrinkage factors calculated and costs allocated to shippers. IGT networks, which are typically smaller embedded networks serving new-build housing developments and commercial sites, sit outside this framework. OVO's proposal attempted to extend a similar discipline to IGTs.

The rejection likely turns on proportionality. IGT networks are small — collectively they serve roughly 1.5 million supply points compared to approximately 23 million on GDN networks. The absolute volume of gas lost to shrinkage on IGT pipes is modest. Creating a dedicated expert role and a new charging mechanism imposes fixed administrative and governance costs that may not be justified by the emissions reduction achievable. A new charge on shippers serving IGT supply points would ultimately flow through to consumer bills on those networks, and if the charge costs more to administer than the shrinkage it prevents, the mechanism fails its own test.

There is a broader pattern here worth noting. OVO has been an active proposer of code modifications across gas and electricity codes, often pushing for mechanisms that price externalities or improve transparency. The instinct to make the cost of gas leakage visible and actionable is sound — it is exactly the kind of cost that currently sits as an unpriced externality on IGT networks. But the route matters. A dedicated charge and a dedicated expert for a relatively small network segment creates exactly the kind of compliance infrastructure that costs more than the problem it solves. The alternative — folding IGT shrinkage into existing GDN shrinkage frameworks, or addressing it through IGT licence conditions — would impose less governance overhead.

For IGT operators (primarily companies like Fulcrum Pipelines, ESP Utilities, GTC, Indigo Pipelines, and Murphy Gas Networks), the rejection removes a potential new obligation. For shippers with IGT-connected supply points, it removes a potential new cost line. For consumers on IGT networks, bills are unaffected.

What happens next

The rejection is a final Authority decision. OVO or another party could raise a fresh modification addressing the same issue with a different implementation approach, but would need to build a stronger case on proportionality. The Ofgem decision letter (published alongside the modification documents) will set out the specific reasons for rejection — the analysis report appendix at 326KB likely contains the cost-benefit assessment that did not stack up.

The wider question of IGT shrinkage emissions remains unresolved. As the gas network approaches the transition period — with hydrogen blending trials, network decommissioning in heat pump areas, and declining throughput reducing the denominator against which shrinkage is measured — the relative significance of gas losses on ageing IGT pipes may increase even as absolute volumes fall. A future proposal that addresses IGT shrinkage through lighter-touch means, perhaps by extending existing GDN shrinkage methodology rather than creating parallel infrastructure, would have a better chance of clearing Ofgem's proportionality bar.

No implementation actions are required by any party. The IGT UNC continues to operate without an Independent Shrinkage Expert or Independent Shrinkage Charge provision.