Presentation on theme: "Commercial Arrangements For Gas Quality Service – Process UNC Transmission Workstream 23 rd April 2007."— Presentation transcript:
Commercial Arrangements For Gas Quality Service – Process UNC Transmission Workstream 23 rd April 2007
Development of Commercial Arrangements - Overview To implement the commercial arrangements for a gas quality service we would need to consider changing the UNC to include definition of the gas quality service registration mechanisms to allow Users to access the product charging arrangements liability arrangements We envisage having a series of workshops to gather the User requirements in each of these areas. Following completion of the workshop schedule National Grid NTS will raise a UNC Modification Proposal via the normal change process.
Timeline Proposed workshop schedule Workshop 1: Define gas quality service – May 2007 Workshop 2: Define registration mechanisms – June 2007 Workshop 3: Define charging arrangements – July 2007 Workshop 4: Define liability arrangements – August 2007 There may be scope to amalgamate later workshops if early progress is made. UNC change process schedule Assume a 4 month change cycle. If UNC Proposal submitted by National Grid NTS on September 12 th, Panel recommendation can be made to Ofgem by 21st January 2008. However, if UNC Proposal submitted by National Grid NTS on August 16 th, Panel recommendation on Proposal can be made to Ofgem by 21st December 2007. We would suggest discussing this at the end of the presentation
Assumptions NGG will carry out feasibility studies only after being approached by an interested party. The feasibility study will be paid for by the interested party. NGG will offer services to the market via an open season process based on information from the feasibility study. The UNC Modification proposal will be developed on the basis of the hybrid 2 model i.e. the plant is built based on User commitment and NGG has an opportunity to build above User signal GS(M)R limits are unlikely to be amended before 2020.
Gas Quality Services - Context At the last Ofgem Scenario’s workstream meeting, NGG presented some data on the likely costs associated with building a nitrogen ballasting plant at Bacton. Headline numbers: Capital costs could be in the range of £200m Operational costs could be in the order of £20m per annum A feasibility study that would allow NGG to hold an open season, would require detailed design work. Typically these types of studies represent 3% of the capital cost i.e. potentially £6m.
Key Issues - Gas Quality Service What service are we offering? Wobbe reduction service or service based on other gas quality factors e.g. enrichment, total sulphur, dew point Basis of product e.g Wobbe adjustment * volume * duration? Single product or multiple product e.g. daily, monthly, annual? Firm or interruptible services? Lead times on delivery e.g. interactions between plant operations and gas flow nominations timescales. Upstream considerations UIOLI Location of service delivery? Who will purchase service – single party or shippers? Method of delivering service: ballasting, blending loops, storage etc. How much of these arrangements will reside within the Transporter Licence, UNC or Ancillary documents?
Key Issues - Gas Quality Service Any questions, views, comments or suggestions for additional items to be included?
Key Issues - Access Mechanisms How can we ensure that an open season can be held based on a feasibility study potentially specified by only a single party? How will we ensure that prices derived in the feasibility study will be applicable to larger/smaller sized plants? How will we reconcile the differing requirements of users e.g. what if each user wants a different level of plant resilience? What if the User specification does not meet the NGG risk profile? Should an open season be held at the feasibility stage to obtain firm requirements (& funding) from all users?
Key Issues - Access Mechanisms How the open season will be run then needs to be considered; Should the open season be limited to the shippers that participated in the feasibility study? How much of the ‘product’ will be offered for sale? Single or multiple tranches? What period between tranches? How will auction results be turned into a signal to build.
Key Issues - Access Mechanisms Any questions, views, comments or suggestions for additional items to be included?
Key Issues - Charging Arrangements Should costs of feasibility study be securitised, paid for in advance or discounted if the plant construction goes ahead? Should plant lifetime be set to 2020? Capital costs of plant focussed on users (of the plant) via capacity charges Operational costs of plant focussed on users (of the plant) via commodity charge Should users pay 100% of plant costs or pass an NPV test? If there is any spare capacity how should this be charged for? If NGG builds any additional capacity how should this be sold? Should there be UIOLI? And if so how should we charge for it?
Key Issues - Charging Arrangements Any questions, views, comments or suggestions for additional items to be included?
Key Issues - Liability Arrangements NGG liabilities It is anticipated that NGG would earn a standard rate of return, therefore the risk of the assets would need to be the same as our existing assets. If NGG is unable to deliver contracted service what would we need to buy-back? The gas quality service for out of spec gas but within specification gas would still flow, or Entry capacity at that entry point, or Gas quality service and entry capacity? NGG’s liabilities would to some extent be influenced by user requirements on resilience etc. NGG would therefore seek to have input to the plant build specifications or would need a mechanism to offset this risk.
Key Issues - Liability Arrangements User liabilities Overrun charges How could we identify overruns at an individual user level?
Key Issues - Liability Arrangements Any questions, views, comments or suggestions for additional items to be included?
Summary & Next steps Hopefully demonstrated that there is a lot to be defined before raising a UNC Mod, hence our proposal to have gas quality as a topic for discussion in the Transmission Workstream. At the start we put forward an initial timetable, if this is acceptable, here are some potential dates: May: Monday 21 st June: Monday 18 th, Tuesday 19 th, Monday 25 th, Wednesday 27 July: Friday 27 th