1. Ofgem presentation to Gas Transmission Workstream
Project
Ofgem presentation to Gas Transmission Workstream
7 October 2010

2. Presentation Outline What is Project TransmiT?
Recap on Gas Transmission Charging regime
How might Project TransmiT affect current gas transmission arrangements?
What is Ofgem asking for?
Timetable and how Project TransmiT will be taken forward

3. What is Project TransmiT?
Open review of electricity & gas transmission arrangements
Covers charging and related connections issues
Driven by Ofgem’s change in duties and governance changes
Objective to facilitate transition to a safe, reliable & value for money low carbon energy sector
Focus is also on practical and commercial difficulties experienced by parties seeking to connect to, and use, the transmission networks
Needs to be mindful of European developments
potential impact on market design and charging principles

4. Gas transmission charges – a quick recap
Ofgem sets allowed revenues for TO & SO through price controls
TO revenue recovered through entry and exit capacity charges
A TO commodity charge is levied on entry flows make up any allowed revenue shortfall
SO charges levied on entry & exit to cover SO operation costs
TO/SO interactions through
Provision of incremental capacity
Incentive trade-offs (eg buy-back v locational sell actions)
Methodology changes need Ofgem approval

5. Gas transmission charging – developments over past year
Entry charging review started in 2008
Concerns over high and volatile TO entry commodity charges
Culminated in GCM19 and associated UNC modifications
Remove firm entry capacity reserve price discounts
Limit release of UIOLI capacity to 90% of firm sold out
Ofgem vetoed proposals after impact assessment
At September TCMF we informed group a transmission review was planned, but scope was uncertain at that time
Encouraged TCMF to continue to develop proposals

6. Related charging issues
UNC246 and variants – credit arrangements for capacity
At what point in the process should revenues be released to fund incremental capacity?
How can we avoid recurrence of Fleetwood issue?
Carbon Capture & Storage (CCS)
How to determine transfer value for existing infrastructure?
Interactions of gas & electricity consumers

7. How might gas charging be affected?
Volatility
Changes in flow assumptions can bring significant volatility; how can this be dealt with?
Short run marginal costs
Possible for non-zero reserve price on daily capacity?
Future gas loads
Will charging principles be appropriate for network if wind displaces significant amounts of gas?
European developments
Harmonisation of tariffs, bundled products, etc.

8. What is Ofgem asking for?
Evidence on:
strengths & weaknesses of current charging system
whether there is a case to reform the either of the charging system or the connection regime
Views on:
changes to rules, processes and administrative procedures which will overcome any shortcomings and facilitate further achievement of our primary objective
process modifications that will allow timely connection of new assets
whether either charging or connections should be dealt with through the Significant Code Review process

9. Timetable and engagement
Roundtable and stakeholders workshops will be held
First workshop will be held in late October/Nov; details to follow
Dedicated web forum will be established
Will allow stakeholders to post papers and analysis directly onto Ofgem website
Continued involvement through Workstream and TCMF expected
Date
Action
17 November 2010
Deadline for responses to call for evidence
October/Nov 2010
First stakeholder event
December 2010
Publish responses to call for evidence
March 2011
Publication of independent academic reports
Spring 2011
Consult on options identified from evidence
Summer 2011
Publish recommendations