It’s important to be aware of the laws which apply to your operation. These include:

• The Energy Acts 1976, 1983, 2004, 2008, 2010, 2011, 2013 and 2016
• The Electricity Act 1989
• The Competition Act 1998
• The Utilities Act 2000
• The Enterprise Act 2002
• The Gas and Electricity (Consumer Complaints Handling Standards) Regulations 2008
• EU Third Package legislation 2009
• EU regulation on energy market integrity and transparency 2011
• The Consumer Rights Act 2015

There may be other laws unrelated to the energy industry which you should be aware of. This could include legislation concerning data handling, health and safety or consumer protection. It’s important to do your research and become aware of all best practices when looking at how to set up an energy supply company.

In addition to legal requirements, the Ofgem electricity supply licence is supported by a set of industry codes. In order to be granted your electricity distribution licence, you will need to understand and remain compliant with these. Briefly, these codes are:

• System Operator – Transmission Owner Code (STC): This code sets out the relationship between the National Grid and transmission owners both onshore and offshore. Although electricity suppliers may not need to adhere to this code, it’s a good idea to be aware of it. More information is available at Ofgem, and the Code Administrator is National Grid.
• Distribution Connection and Use of System Agreement (DCUSA): This code sets out the requirements in regards to the connection to and use of the electricity distribution networks in the UK. It covers things like charging methodologies, connection agreements and codes of practice for electricity suppliers. All electricity suppliers are required to become a party to this code. More information is available at Ofgem, and the Code Administrator is Electralink.
• Smart Energy Code (SEC): The Smart Energy Code applies to both Ofgem gas and electricity supply licences and relates to the provision and management of smart metering. More information is available at Ofgem and the Code Administrator is SECAS.

If you think you need to become a party to one of these codes in order to gain your electricity distribution  licence, you should contact the Code Administrator for further information.

In addition to these mandatory codes, many independent energy suppliers choose to sign up to various voluntary codes of practice. Examples include the Energy Switch Guarantee, which ensures customers are switched in a hassle free way, and the Safety Net for Vulnerable Customers, which protects those most at risk from disconnection.

As an electricity supplier, you are not required by Ofgem to sign up for any of these codes. However, it does showcase that you are running an ethical business with best practice in mind, so it’s well worth considering.

Staying compliant with the electricity supply licence is not difficult, as most of the requirements are basic good practice for running an energy supply business. However, you do need to be familiar with the guidance and standards applicable to your enterprise. To help you get started, we’ve added some tips for compliance below:

• Understand what you need to report, and when: Ofgem will expect you to self-report on a variety of issues throughout the year. This will include things like rolling out smart meters, complaints handling statistics and compliance with the energy price cap. Find out when and how you need to report, and schedule them in with plenty of time to spare.
• Honesty is the best policy: Much of the electricity distribution licence is concerned with treating customers fairly. Ensuring you are well-placed to provide accurate, honest information and to treat each customer equally will ensure your compliance.
•  Look after those who need it most: Customers in vulnerable situations are of great concern to Ofgem. You must work to identify those who are most at risk and put in place effective procedures to protect those people as part of your compliance activities.
•  It’s not just your team who needs to comply: The conditions of the electricity supply licence apply to everyone who works for and represents your business. As well as your own team, think about any businesses who refer to you, such as price comparison websites; these need to uphold compliance too.
• Take all the information you can get: To help new suppliers, Ofgem has provided many factsheets and documents to help you understand the electricity supply licence. Take some time to work through their publications (here) so you can fully understand what’s expected of your business.

Once you’ve received your electricity supply licence, Ofgem will continue to support and guide your business to remain compliant. The Ofgem website has a dedicated section to independent energy suppliers , containing useful information and links to further sources of help.  It is possible to become exempt from the requirement to have a full electricity supply licence. There are two routes available to do this: