Flow Flexibility Capacity Joint Office 7 th December 2006

Effect of Within Day Demand Change ShipperDNNTS  Actual demand is below expectation  Shippers are long and system is in imbalance  Actual demand is below expectation  National Balance depends upon DNs hitting end of day stock  Hence need to reduce offtake from NTS  Actual demand is below expectation  DNs pass imbalance onto NTS  National Balance is achieved by selling gas off the system/shippers informed of imbalance Consider situation where demand is falling: Therefore imbalance should be resolved by flow change not by use of NTS storage

Effect of Within Day Demand Change Offtake Rate Time 22:0006:00 Planned Flow Rate at start of day Flexibility utilisation = cumulative offtake to 22:00 – (2/3) of daily flow

Effect of Within Day Demand Change Offtake Rate Time 22:0006:00 Planned Flow Rate at start of day Actual Flow Rate Change of flow to meet change of demand forecast increases flow flex utilisation The following example demonstrates the effect of a demand change at 22:00; 22:00 was chosen for the sake of clarity

Effect of Within Day Demand Change Offtake Rate Time 22:0006:00 Planned Flow Rate at start of day Actual Flow Rate Change of flow to meet change of demand forecast increases flow flex utilisation The following example demonstrates the effect of a demand change at 22:00; 22:00 was chosen for the sake of clarity Average Flow Rate

Effect of Within Day Demand Change Offtake Rate Time 22:0006:00 Planned Flow Rate at start of day Actual Flow Rate Change of flow to meet change of demand forecast increases flow flex utilisation The following example demonstrates the effect of a demand change at 22:00; 22:00 was chosen for the sake of clarity Average Flow Rate Flexibility utilisation

Impacts  DNs must ensure that their bookings of flow flex allow for this effect.  This artificially inflates the volume of storage required by a DN  Whilst the flow flex apparently taken has no impact on NTS storage  the NTS cannot simply oversell flow flex as they would then be unable to deliver if the DNs chose to use their allocation of flow flex to meet true diurnal demand  DN investment will be required to provide additional storage that is unnecessary  If a DN runs out of flow flex, they will have an incentive to keep within their flow flex limit by increasing their end of day stock  This hides the imbalance from the NTS, undermining both the “national” and “daily” elements of the balance  When demand has been under-forecast the opposite effect occurs with the apparent consumption of flow flex being understated  Thus NTS storage could be over-stretched without the connected parties having broken their flow flex limits

Flow Flex Utilisation Correction  Presently: flow flex = flow (06:00 to 22:00) – 16/24 (end of day flow) But can correct for within day demand change: Real flow flex utilisation = metered flow flex – correction Where correction = demand change * correction factor Overruns triggered if real flow flex utilisation > booked flow flex

Flow Flex Utilisation Correction Factors Time of Forecast Change Coversion of Forecast Change to Flow Flex Hours Action Pre 2200 Hours Action Post 2200Total Hours Action % % % % % % % % % % % % % % % % % % % % % % % %011

Example TimeDemand Change (mcm) Correction factor Flow flex correction (mcm) 10: = : – 35.9 = : – 36.1 = : – 35.7 = Total0.281 The following example shows how a falling demand throughout the day would result in a flow flex correction of mcm representing 8% of the LDZ flow flex requirements

Advantages of Correcting for Within Day Demand Change Reveal real NTS diurnal support required by DNs Avoids undermining NTS balance No incentive for DNs to hide imbalance Provide certainty to DNs when booking flow flexibility Reduce costs of DNs investing to provide storage