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Presentation on theme: "Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight."— Presentation transcript:

1 Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. Mod 0333: Update of default System Marginal Prices Transmission Workstream: 9 th November 2010

2 Contents  Progress to date  Balancing performance analysis  Assessment of Mod 0333 against Relevant Objectives  Assessment of any alternative options?  Next Steps

3 Progress to date  Review Group 0291 looked at possible options to update values  Mod 0333 raised using proxy of compressor fuel (injection + withdrawal) & pipeline (space) costs  UNC Panel sent mod to Tx Workstream for up to 3 months, with a target of 1 month mindful of April 2011  Following feedback from October Tx Workstream an option for the Mod has been developed to reflect;  NTS entry & exit capacity charges  1 October Annual Review  Removal of Imbalance volume from methodology  Workstream Report due no later than December Panel

4 Balancing Performance (1) Imbalance volumes  Since 2000/2001 average daily imbalance volume has reduced by 16GWh  This equates to daily reduction of £252k* gross cashout amount  Equivalent to annual reduction of £107M* gross cashout amount  Indication is that introduction of default cashout has provided incentive for users to balance *based on 29/10/2010; WD price of p/kWh Gas Year price of p/kWh + average cashout of p/kWh Gross cashout volume per day Gross cashout as % of throughput per day Trend of Gross cashout volume Soft Landing Introduced Default Cashout introduced Imbalance tolerances removed

5 Balancing Performance (2) Market Balancing Actions  Residual Balancing volume has also decreased since 2001  Equivalent to annual reduction of 5,497GWh or £9.9M  Reduction in costs should be considered alongside Linepack Measure Incentive & Shipper imbalance performance (previous slide)  Introduction of Linepack Measure Incentive may be expected to increase Residual Balancing volume Linepack incentive introduced

6 Assessment of Mod 0333 against Relevant Objectives  (a) “the coordinated, efficient and economic operation of the pipe-line system to which this licence relates”  Updated default cashout levels will provide a robust proxy for operational costs of managing imbalanced gas volumes  Users will be able to take informed decisions on their use of Linepack flexibility by assessing the benefits and costs of being ‘cashed out’

7 Assessment of Mod 0333 against Relevant Objectives  (d) “so far as is consistent with sub-paragraphs (a) to (c) the securing of effective competition”  Proposed default cashout charges will continue to incentivise users to balance  Users will continue to be encouraged totrade out their imbalance positions efficiently & economically thereby promoting competition and market liquidity  Updated cashout values based on proxy for operational costs will ensure users have greater transparency of the costs of Linepack flexibility & the ability to compare these costs with alternative sources of flexible gas.  Providing improved information will encourage further competition in the provision of flexibility services

8 Assessment of Mod 0333 against Relevant Objectives  (f) “so far as is consistent with sub-paragraphs (a) to (e), the promotion of efficiency in the implementation and administration of the network code and/or the uniform network code”  Introduces mechanism to ensure default cashout prices are updated on an annual basis (more efficient than an annual mod)  (c) “the efficient discharge of the licensee's obligations under this licence”  In proposer’s view, Mod 0333 is the most appropriate update to the default cashout values in line with C27 obligations

9 Summary  Mod 0333 is in the proposer’s view the most appropriate update to the default cashout prices  Reflects a proxy for operational costs of providing linepack flexibility  Maintains current commercial incentive for users to balance (preserves efficient primary balancing role)  Maintains basis for competition and market liquidity to allow users to efficiently and economically trade out imbalance positions

10 Assessment of alternative options?  In previous discussions a number of alternative options have been raised  Would Tx workstream like to take the opportunity to evaluate some / all alternative options against relevant objectives?  Remove default cashout  Use solely compressor costs  Update current storage based methodology  Market based option (% SAP, average bid/offer spread)  Polluter pays, helper get SAP  ?

11 Next Steps  Workstream Report due at December Panel  ??

12 Appendix: Assessment of alternative options? SAP Compressor Costs Update current methodology % SAP SAP & SMP (a) Economic & Efficient operation of the system (Cashout & Residual Balancing volumes) (d) Securing of effective competition (Impact to market liquidity & alternative flexible sources)


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