Derogation and Sandbox Process
A Derogation is an exemption from or relaxation of one or more REC obligations. A derogation can be applied for directly or an applicant can enter the process via a Sandbox application. A Sandbox trial enables organisations to trial new products, services, or business models without being subject to the usual rules that might apply under the REC. Sandbox trials are intended to help inform decisions about improvements or changes that might be beneficial and can be a precursor to changes to the REC arrangements.
Derogations should not be used to relax obligations because an organisation does not agree with the obligation. If Parties wish to change obligations set out in the Code, this should be picked up as part of the REC Change Management process .
Examples
An example of a valid Derogation application would be seeking a three-month derogation from a REC obligation whilst a new internal system was being implemented, which the Party is able to evidence would impact their ability to meet the obligation.
An example of a Sandbox application would be a Party conducting a trial to help facilitate an industry initiative such as hydrogen powered projects. For instance, in order to fulfil their actions for the purpose of the trial, the applicant is required to be derogated from a specific REC obligation.
For full information on the process, please see the Sandbox and Derogation User Guide.
How to Raise a Derogation
Any current or prospective Party to the REC may apply for a Derogation or Sandbox to the REC Performance Assurance Board (PAB) by downloading a Derogation and Sandbox Application Form on the REC Portal, completing and submitting it to the Code Manager via the Service Desk or their Operational Account Manager.
If you are a REC Party and would like to raise a Derogation, this should first be discussed with your assigned OAM, who will be able to support you with the application. Alternatively, contact the Service Desk and the Code Manager will be happy to support you in raising your application. This includes discussing the information and evidence required to support the application, prior to it being submitted and shared with the PAB.
The Application Form to raise a Derogation or Sandbox can be found here on the Portal. The Form requests information including the following:
- A summary and rationale for the Derogation or Sandbox trial;
- The impact on REC obligations;
- The impact on REC Parties, Service Providers or processes;
- The requested length of the Derogation or Sandbox period;
- Any actions/activities planned during the Derogation period including key milestones and dates; and
- Proposed controls or measures to assess the success of the Derogation or Sandbox trial, and how you will mitigate any impacts.
Once an Application Form has been submitted, the Code Manager will provide the Performance Assurance Board with a report, including its recommendation on whether the application should be accepted. Following the decision of the Performance Assurance Board, the Code Manager will inform the applicant and Ofgem, including reasons for the decision and any conditions specified.
Performance Assurance Board Role
The Performance Assurance Board (PAB) is the Committee that makes the decision on whether a REC Derogation or Sandbox trial is accepted. The PAB decision may include setting certain conditions, terms and/or scope of the Derogation or Sandbox and its duration. The PAB will be responsible for monitoring the Derogation or Sandbox, and can retract, amend or add to the conditions applied at any time. Applicants have the right to appeal decisions made by the PAB to the Authority. For more information on the PAB appeals process, please see the PAB procedures document.
Derogation and Sandbox applications should include sufficient supporting evidence for the PAB to consider. This should include evidence to justify the reason for the application, and the rationale for the suggested timescales. At the PAB Chair’s discretion, applicants, or relevant impacted stakeholders, may also be invited to PAB meetings to present the evidence and answer questions to support PAB Members' decision making.
Code Manager Reporting
The Code Manager monitors ongoing Sandbox trials and conditions that are in place and provides regular feedback to the Performance Assurance Board on how the applicant is complying with conditions. Throughout the monitoring process, the Code Manager will assess if a Sandbox trial has increased an identified Retail Risk or had a negative impact on any third parties, and report increased risks to the Performance Assurance Board. If appropriate, a revised recommendation for may be made, including additional conditions being put in place or other remedial measures introduced to mitigate the risks.
Early Termination
The Code Manager may recommend to the Performance Assurance Board that a Sandbox trial is terminated early, either at the request of the applicant or if the Code Manager considers the trial poses a continued unacceptable risk to third parties despite remedial measures being put in place.
Post Trial Reporting
Following the completion of the Sandbox trial period, the Code Manager will produce an assessment of the trial to determine its impact and provide a report for the Performance Assurance Board. The report will include:
- Lessons learnt and reporting that could be applied to any future Sandbox applications
- An evaluation of the impacts and cost the trial had on everyone concerned
- An assessment of whether the trial had a positive or negative impact on the achievement of the REC Objectives; and
- A recommendation on whether a REC Change Proposal may be brought forward to implement improvements to the code.
Sandbox and Derogation Register
Details of ongoing and historic REC Derogations and Sandbox trials can be accessed via the Sandbox and Derogation Register on the REC Portal. This page presents relevant information related to all Derogation and Sandbox applications that have been submitted. The register sets out each application, the associated documentation and the status of the application, for example, if it has been accepted, rejected, deferred, or any conditions that may have been applied.
For full information on the process, please see the Sandbox and Derogation User Guide.