1. Entry Capacity Substitution
Paul O’Donovan
Gas Transmission Policy
7 June 2007

2. Outline What is capacity substitution? Policy objectives
Current status
Points to note

3. What is capacity substitution?
Mechanism which allows unsold capacity to be exchanged for capacity at entry point(s) which is/are signalling a requirement for incremental capacity investment
Represents a permanent shift of capacity from the donor(s) to the recipient(s), with donor ASEP capacity adjusted appropriately

4. Policy objectives
Maximise use of existing Transmission network assets for the benefit of consumers
Intention is to avoid both capacity sterilisation and unnecessary infrastructure investment while accommodating changing flow patterns
NGG to make informed judgement on how unsold capacity can be put to use in other areas of the network that are signalling investment requirements
Will be enforced through a new licence condition

5. Current status
Methodology statement being consulted on – finishes 15 June
Ofgem has two months within which to veto
Would be longer if an Impact Assessment was deemed to be necessary
Approval by mid-July would allow for implementation after September 07 QSEC

6. Points to note Targeted at avoiding unnecessary investment
Potential impact on LTSEC strategies
Trade & transfer