2022-066 development and assessment of reform options to local energy institutions and governance

The purpose of the Distribution System Operation (DSO) Governance review is to establish the changes needed to institutions and governance arrangements in order to deliver the energy system functions Ofgem consider are needed at a sub-national level to facilitate a timely and cost-effective net zero. This builds on our joint commitment with the Department for Business, Energy and Industrial Strategy (BEIS) to ensure that institutional arrangements governing the energy system are fit for purpose for the long term.

Ofgem recently launched the review with a call for input, setting out and seeking evidence and views from stakeholders on the suitability of current and planned institutional and governance arrangements in place for delivery of energy system functions (energy system planning, real-time operation of local energy networks and market facilitation of flexible resources) and potential alternative arrangements. To facilitate input from stakeholders on the case for change and potential reform options, Ofgem included in the call for input sample framework models for alternative arrangements. These sample models range from relatively small changes such as governance reforms within existing institutions to drive effective delivery of energy system functions, to more significant reforms including reshaping the roles of existing institutions or setting up new institutions.

Our next step is to compile perspectives and evidence on the case for change and further develop reform options through broad stakeholder engagement. Over the second half of this year, the focus will be on evaluating reform options, aiming to publicly set out conclusions by early 2023.