In February 2025, a modification to an industry rulebook most people have never heard of changed how electricity can be bought and sold in Britain. It received almost no coverage. For businesses buying power, it is one of the more consequential things to happen to the market in a decade.
The change is called P442, and the easiest way to understand it is by analogy with open banking. Open banking did not invent the ability to move money. It built the plumbing that let someone other than a high street bank do it, and the competition followed the plumbing. P442 is the same shape of change. Small renewable generators were always allowed to sell power directly to businesses. What did not exist was a settlement mechanism that could tell their electricity apart from everyone else’s.
Without that, locally generated power got swept into the same calculations as supply from the large licensed suppliers, and picked up the same policy levies on the way. The generator could sell it, but the system could not properly count it.
What actually changed
Ofgem approved P442 in May 2024 and it was implemented on 27 February 2025. It created a new settlement role, the Exempt Supply Notification Agent, whose job is to identify which volumes are exempt and make sure they settle correctly rather than being absorbed into licensed supply figures. Underneath that sits a data problem: generation has to be matched
to consumption on a half-hourly basis, per site, with the resulting volumes reported accurately into the market.
That is why this is a technology story as much as an energy one. The rule change is the easy part. Doing the fine-grained matching at scale, across multiple sites, with data clean enough to submit into settlement, is the part that determines whether any of it works in practice.
Where the money comes from
Licensed suppliers are required to fund a set of government energy programmes, principally Contracts for Difference, the Capacity Market and the Renewables Obligation. Those levies apply to licensed supply only, and on a typical business bill they are worth in the region of 6p per kilowatt hour. On electricity matched directly from a licence-exempt generator, that element falls away.
It is then usually shared. A common structure splits it roughly three ways: about 2.5p comes off the buyer’s bill, about 2.5p goes to the generator on top of the export price, and about 1p covers running the scheme and getting the settlement data right. On matched volumes, that can mean a reduction of around 25 to 30 per cent against a typical business electricity rate.
Three caveats matter, and any provider unwilling to state them is worth avoiding. The saving applies to matched volume, not to the whole bill, so it depends entirely on how much of your consumption can be matched to local generation. Network charges and the Climate Change Levy are unaffected. And this remains a young part of the market, so agreements need to be structured to survive future rule changes.
Why it matters beyond energy
The wider pattern is one that anyone who watched fintech will recognise. A settlement layer opens up, an intermediary role is created to police it, and the value that previously accrued to incumbents by default becomes contestable. Generators earn more than the grid would pay them, buyers pay less than the standard route, and the difference comes out of charges rather than out of anyone’s margin.
The practical question for a business is not whether P442 is interesting but how much of its own load can realistically be matched, and how the resulting saving is divided. Those are site-specific questions with unglamorous answers. Purely Energy has published a detailed explainer on P442 covering the mechanics, eligibility and how to check what a given arrangement is actually worth.
A market structure changed and the press release never came. The businesses that benefit will be the ones that went looking.
Frequently asked questions
What is P442?
P442 is a modification to the Balancing and Settlement Code, approved by Ofgem in May 2024 and implemented on 27 February 2025, that allows licence-exempt supply volumes to be excluded from the calculations used to assign Electricity Market Reform levies to licensed suppliers. It introduced the Exempt Supply Notification Agent role to handle that identification, and relies on half-hourly matching of generation to consumption.
How much can a business actually save under P442?
The avoided policy charges are worth around 6p per kilowatt hour, but that value is normally shared between the buyer, the generator and the scheme operator, and it applies only to the volume matched to local generation. A realistic figure depends on what proportion of a site’s consumption can be matched, which is why headline percentages quoted without reference to a specific load profile should be treated with caution.
Which generators can take part?
Small-scale renewable generation supplying under a class exemption from the requirement to hold a supply licence, set out in the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001. The exemption is defined by supply volume rather than by generator nameplate, broadly up to 5MW to non-domestic premises with a lower sub-limit for domestic supply. In practice it covers small solar, wind, hydro and anaerobic digestion, commercial rooftop solar, community energy schemes and sites with their own on-site generation alongside an import connection.
Sources
Elexon, P442 modification proposal: https://www.elexon.co.uk/bsc/mod-proposal/p442/ [nofollow]
Ofgem, approval of BSC modification P442: https://www.ofgem.gov.uk/decision/approval-bsc-modification-p442 [nofollow]
Welsh Government, licence-exempt electricity supply guidance: https://www.gov.wales/licence-exempt-electricity-supply-guidance-html [nofollow]
