Code governance is an oft-overlooked aspect of the energy market; its complexity and lack of transparency places a high barrier to entry. This specialised area can have significant impacts on the functioning of the market and particularly on the costs faced by different participants.

In this chart of the week, we have highlighted some of the major Connection and Use of System Code (CUSC) modifications currently progressing through the code governance process and their anticipated impacts on electricity suppliers.

The reasons behind the numerous changes currently open in the market are diverse. Proposal CMP267 was raised in response to the impact of unexpectedly high “Black Start costs” on balancing services use of system charges. Much has already been said about CMP264 and CMP265, which would impact the current embedded benefits regime for small generators. CMP271 and CMP274 similarly propose radical changes to transmission charging. While it is hard to predict the exact consequences, all of these have the potential to bring major changes.

On the other side of the scale is CMP261. This modification, raised by SSE, looks to ensure that the level of transmission charges paid by generators remains within the limit set by the EU. However, as a result of this, it has the potential to add extra costs to demand charges, significantly increasing suppliers’ costs.

In addition, it must be remembered that these are only those modifications that would impact on costs recovered through the CUSC. If the modifications raised under the other industry codes are considered then the number of potential impacts on supplier charges rises significantly. Moreover, while we have only highlighted the supplier impacts, the majority of these modifications will also impact generators and other market participants. 

The amount of change faced by participants therefore shows no sign of decreasing and represents an ever-larger source of risk (and opportunity). This is particularly true given the high barriers to entry for engaging in code governance, which can exclude smaller, and potentially, more innovative parties from taking part and keeping abreast of industry changes.

To view the table click here