Four factors need to be considered when determining whether a business will require a load control licence under the new regime:
activities undertaken (e.g., is the business acting as a Load Controller, Flexibility Service Provider (FSP), or both?);
energy smart appliances (ESAs) affected;
customers served; and
exemption availability/criteria.
1. Load Controllers and FSPs
Load Controllers: Acting as a Load Controller is a licensable activity, so a load control licence will be required unless an exemption applies. An end user of an ESA will never be treated as a Load Controller.
Under the draft regulations, the relevant Load Controller activities are:
- creating or changing load control signals; or
- controlling when a load control signal is sent, in order to adjust the current or future flow of electricity into or out of an ESA (or another appliance) in response to that signal.
FSPs: The draft regulations treat “entering into a contract with a consumer to provide for the sending of a load control signal to an energy smart appliance at that consumer’s premises” as a load control activity. This limb therefore focuses on the contractual relationship that FSPs have with the end consumer.
Potential overlap: Depending on services provided, a business may be categorised as a Load Controller, an FSP, or both. It is therefore critical to clearly identify the activities being carried out to ensure compliance with the new regime.
2. Load control activities: worked examples
The Government has outlined various activities that are likely (or unlikely) to require a licence under the new regime. In each case, the key question is whether the activity influences the ESA through a load control signal or interacts with an ESA in some manner.
| Activities likely to require a licence | Activities unlikely to require a licence |
Company A operates EV chargers: An aggregator sends instructions telling an EV charger to charge at set power levels and times. This is a load control signal because it tells the appliance how and when to use electricity. | Company X provides incentive information: A data platform sends information that may affect the price or use of electricity, but it does not set how the ESA responds and does not know how the ESA is likely to respond. Simply providing information does not create or change a load control signal, or control when one is sent. |
| Company B caps an ESA’s power level: An aggregator sets a maximum power level at which the ESA can operate for a set period. This is a load control signal because it affects how the ESA uses electricity. | Company Y provides price data through an API: A consumer links their ESA to an energy API (Application Programming Interface) that provides time-of-use tariff prices. The ESA decides for itself whether and how to respond. Providing the data is not a load control activity, unless the provider is instructing or limiting how the appliance responds. |
| Company C’s signal is altered by an intermediary: An intermediary changes the instruction or limit before it reaches the appliance. Company C is still carrying out a load control activity because it is sending load control signals. The intermediary is also carrying out a load control activity because it is changing a load control signal. | Company Z issues a firmware update: A manufacturer sends a firmware update that does not set or change how the appliance responds to a load control signal. This is not a load control activity. |
3. The proposed class exemptions
The Secretary of State proposes to amend the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 to create three new exemption classes, as set out below. The proposed class exemptions seek to establish a proportionate and risk-based approach to licensing, directing regulatory oversight towards load control activities with the greatest potential to affect or contribute positively to the operation of an increasingly flexible electricity system. Accordingly, activities and ESAs capable of delivering the most significant flexibility benefits for consumers and the wider electricity system would remain subject to the licensing requirement. The regime as a whole aims to support the transition to a secure, affordable and decarbonised electricity system while protecting consumers and the electricity system itself.
| Proposed Exemption | Policy Context |
| Class A: out-of-scope appliance technologies | The Class A exemption will apply to businesses whose load control activities relate only to appliances outside the scope of the regime.
At this stage, the appliances in scope are:
|
| Class B: larger non-domestic consumers | The Class B exemption will apply to businesses providing flexibility services to customers that are neither households nor small businesses. This reflects the SSES Programme’s focus on consumer-led flexibility. Larger businesses are more likely to have tailored contracts and to understand and manage the risks involved, so the exemption keeps protections where they are most needed without adding unnecessary regulation. |
| Class C: activity solely for consumer benefit | The Class C exemption will apply where load control is carried out only for the benefit of consumers, rather than to provide services to transmission or distribution system operators or to wholesale electricity traders in Great Britain. In practice, this separates load control that solely benefits the consumer (for example, scheduling an ESA to run at cheaper times) from load control linked to wholesale markets or system services. The Government’s Notice of Proposed Class Exemptions explains the policy intent behind this exemption. In short, the exemption will not apply, and a licence will still be required, where a business carries out a licensable activity and also:
|
4. Which customers are covered?
The licensing regime is primarily intended to provide protections for domestic and small business consumers. While the Class B exemption described above applies to FSP activity, it does not extend to FSPs providing load control services to domestic or small business consumers.
Following the 2025 licensing consultation and response, the Government proposed to use a definition of ‘small business consumer’ based on article 2 of the Gas and Electricity Regulated Providers (Redress Scheme) Order 2008 (as amended). Under this definition, a non-domestic consumer qualifies as a small business consumer if it has either (i) annual electricity consumption of not more than 200,000 kWh or (ii) fewer than 50 employees (or their full-time equivalent) and an annual turnover not exceeding £6.5 million or a balance sheet total not exceeding £5 million. Where a customer meets this definition, the exemption for larger non-domestic consumers will not be available to FSP contracting to provide load control services to that customer. Accordingly, the FSP may still be required to hold a load control licence, subject to any other applicable exemption.
5. Businesses that already have a supply licence
Holding an electricity supply licence will not remove the need for a load control licence. Suppliers carrying out licensable load control activities must obtain a load control licence and comply with its conditions, including the Load Controller obligations on cyber security and grid stability, which the supply licence does not cover.
That said, the Government recognises the overlap between the two regimes. To avoid duplication, it intends to disapply or adjust load control licence conditions that significantly overlap with supply licence requirements, and to reduce some of the evidence suppliers must provide when applying. Further detail is expected in due course.
6. Next steps for businesses: key questions to ask
To assess whether a licence is likely to be needed, businesses should consider the following:
- Does the business create or change a load control signal, or control when one is sent?
- Does it contract with consumers to send load control signals to appliances/ESAs at their premises?
- Which appliances (including ancillary technologies) are involved, and are they in scope?
- Are its customers households, small businesses or larger businesses?
- Does the Class A, B or C exemption already cover its relevant activities?
- If a licence is needed, is the business likely to be a Load Controller, FSP, or both?
Looking ahead: the next article in this series will outline the load control licence application process, the documentation required to support the application, and what happens in the event an application is rejected.
See our previous article on this topic, “New load control licensing regime on the horizon – What energy flexibility businesses need to know” here.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email enquiries@sharpepritchard.co.uk.
