This article considers the new right of appeal against decisions by Ofgem relating to the modification of certain energy codes.  This move represents a significant development in regulatory certainty and accountability of gas and electricity markets

The Office of Gas and Electricity Markets (OFGEM) has the final say over a number of industry codes governing operation of the gas and electricity sectors.   A new right of appeal against decisions by Ofgem in connection with modification of certain energy codes came into force on 14 July 2005.  Prior to this the only way in which industry participants could appeal against Ofgem's decisions was to seek judicial review. 

Under the new rules, appeals may be made to the Competition Commission which can quash Ofgem decisions to approve modification decisions, direct that recommended modifications vetoed by Ofgem have effect, or remit decisions to Ofgem for reconsideration and redetermination in line with its directions. 

The new right of appeal only applies in respect of certain codes (generally those with most commercial significance) and where Ofgem has the final right of approval.  Grounds on which appeals can be made are set out in the Energy Act 2004.  The codes to which the right of appeal will apply are, in electricity:

  • The Balancing and Settlement Code (BSC)
  • The Connection and Use of System Code (CUSC)
  • The Master Registration Agreement (MRA)

In gas, they are:

  • The Uniform Network Code, and associated short form network codes
  • The Supply Point Administration Agreement (SPAA)

In general, appeals will only be allowed where Ofgem disagrees with the decision of the industry panels that govern the codes.  Ofgem is also entitled to deny the right of appeal where the delay caused by an appeal might have a material adverse effect on the availability of gas or electricity to customers.  The Competition Commission may also refuse permission for appeal where the appeal is brought for trivial or vexatious reasons or where there is no reasonable prospect of success. 

The deadline for application for appeal to the Competition Commission is 3 weeks after the modification decision is made and the final decision of the Commission will normally be issued within 12 weeks (exceptionally a maximum of 14 weeks) from the date of Ofgem's decision. 

While the new right of appeal is quite limited, due to minimising undue delay and preserving security of supply, it represents a significant development in regulatory certainty and accountability of gas and electricity markets.

The Commission has published rules and guidance for the appeals, available at http://competition-commission.org.uk/rep_pub/rules_and_guide/index.htm

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