Code Governance Review Major Policy reform Proposals Gas Customer Forum 26 January 2009.

Code Governance ReviewMajor Policy reform

ProposalsGas Customer Forum

26 January 2009

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Introduction

• Review initiated in November 2007

• 4 workstrands:– Governance of Charging methodologies;– Environment and code objectives

• This presentation:– Major Policy Review (including self governance)– Role of code administrators & participation of small

participants and consumer representatives

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Background

• Some codes have been in place for some time.• Governance arrangements have facilitated incremental

changes well.• Plethora of change mechanisms• Encountered problems with major policy reform – TAR• Public policies are impacting on the industry more than

ever.

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Industry Changes

• Regulatory changes– Sustainable development / environment,– Better regulation,– Appealibility of code decisions,– Requirement to undertake Impact Assessments.

• Market changes– New smaller participants,– Renewables / distributed generators,– Future changes – Smart Metering?

• European Policies

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Current Code Governance Arrangements

• What are we trying to answer;

– Can current arrangements accommodate public policy reform?

– Do current arrangements promote inclusivity?

– Are current arrangements flexible enough to deal with future challenges?

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Good governance principles

• Promote inclusive, accessible and effective consultation• Governance rules and processes transparent and easily

understood• Rules administered in independent and objective fashion• Provide rigorous and high quality analysis• Cost effective• Rules and processes flexible to allow effective change

management• Deliver in a manner that places a proportionate regulatory burden

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Ofgem initiates review

Third party raises mod proposal

Categorisation / filtering

Merits appeal to

Ofgem

Ofgem-led policy review

process

Policy / principles decision –

legally-binding

Mod proposals

developed to implement

conclusions

Ofgem decision

Consultation and Panel

recommendation

PATH 2 – IMPROVED STATUS QUO

PATH 3 – SELF GOVERNANCE

PATH 1 – POLICY REVIEW

Standard CC merits

appeal

Consultation and Panel decision

Ofgems Reform Proposals

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Key Issues (1)

• Categorisation / Filtering– First consider if a modification should proceed down path 1,– If not, by applying a further set of criteria to determine if it

should proceed along path 2 or 3.• Filtering mechanism

– Option A – Ofgem allocates modification– Option B – Industry allocates modification with Ofgem ability to

veto

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Key Issues (2)

Self Governance• Key questions relating to the design of self governance:

– Who should be the decision maker for the modification?

– What voting procedures should apply governing decisions?

– Should there be mechanisms to send proposals to Path 2 (‘Improved status quo’)?

– What appeal rights should exist?

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Key issues

Self Governance

• Panel Structure– Independent or representative ?– A mixture?

• Voting mechanism– Thresholds?– Constituency voting?– Majority ?

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OfgemPolicy /

principles decision

Network / Panel

develops and raises

implementing mods

Option 1Ofgem

document contains policy principles only

Option 2Ofgem

document also outlines where

mods are needed

Option 3Ofgem

document also contains legal

drafting


Merits appeal to

Ofgem

Ofgemdecision



Standard CC merits

appeal



recommendation




Merits appeal to

Ofgem

Ofgemdecision



Standard CC merits

appeal



recommendation

Merits appeal to

Ofgem

Ofgemdecision



Standard CC merits

appeal



recommendation

Network / Panel further

develops implementing

mods

Note: over-riding code objective (and assessment criterion for mods): implement policy principles

Standard CC merits

appeal

Ofgemdecision


recommendation

Implementing the outcome of major policy reviews

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Safe Guards

• Appeals Mechanism

– Whichever option was adopted for the ‘outcome of the policy review’

• High Level binding conclusions• Detailed Binding Conclusions• Ofgem prepares modification and legal text

– At the end of the ‘outcome’ phase, we consider the Energy Act appeals mechanism would be applicable

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Next Steps

• Ofgem workshop: 11 February, Victoria, London.

• Deadline for consultation responses: Friday 27 February.

QUESTIONS / OBSERVATIONS.

Code Governance Review Major Policy reform Proposals Gas Customer Forum 26 January 2009.

Documents

Transcript of Code Governance Review Major Policy reform Proposals Gas Customer Forum 26 January 2009.