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Gas Emergency Arrangements Proposal Transmission Workstream 5 th April 2007.

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Presentation on theme: "Gas Emergency Arrangements Proposal Transmission Workstream 5 th April 2007."— Presentation transcript:

1 Gas Emergency Arrangements Proposal Transmission Workstream 5 th April 2007

2 Options for the Design of Gas Emergency Arrangements - background  Ofgem chaired a series of workshops, under the heading of “Options for the design of gas emergency arrangements”.  Objective of how to attract ‘Merchant Gas supplies’ during a NGS(GD)E.  A number of approaches were put forward.  The preferred option - Option 1, was developed by APX as two sub options  1a – Keep Locational/Physical Markets Open For NG use only & suspend Title Market  1b – Keep All OCM Markets Open  APX agreed to develop this option with help from Statoil. Assistance was also offered by National Grid NTS and EON.

3 Current Position – National Grid NTS  The complexity of the issues driven by the changing UK supply position means that the necessary commercial, regulatory and operational regime changes needed to face these challenges can only be delivered by the engagement of all relevant industry parties i.e. Shippers, transporters, end consumers, HSE, DTI, Ofgem etc.

4 Current Position – National Grid NTS  Medium term position:  We are committed to working with industry parties to achieve resolution of this issue in a coordinated manner;  UNC Transmission Workstream  Customer forum  Shipper Forum  EBCC  E3C  Short term position:  We intend to raise a UNC Modification to retain shipper to shipper trading via the OCM during a NGS(GD)E.

5 Objectives  National Grid NTS has developed this draft Proposal with the objectives of:  Developing arrangements to open the On the Day Commodity Market during a Stage 2 (& higher) Network Gas Supply (Gas Deficit) Emergency.  Developing arrangements that will deliver market reflective and dynamic cashout prices during an Emergency.  Note that this Proposal does not affect the current arrangements during a Critical Transportation Constraint Emergency.

6 Nature of Proposal  The basis of the draft Proposal is:  The OCM will remain available to Shippers throughout an NGS(GD)E.  National Grid NTS will continue to suspend its own use of the OCM in line with the transition to physical balancing of the supply/demand position via coordination with the NEC.  Cashout prices for each Day in the Emergency will be based on the trades carried out between Shippers.  Positive imbalances will be cashed out at the weighted average price of all trades for the Day.  Negative imbalances will be cashed out at the marginal (highest) price of all trades made on the Day.  On Day 1 of the Emergency the cashout prices for that Day will be based on all trades taken for that Day regardless of whether they occurred before or after the declaration of the Emergency.  On any Day during the Emergency where no trades are transacted default arrangements will apply to set the cashout prices.

7 Potential benefits  (a)..‘efficient and economic operation of pipe-line system’..  Provision of additional route to market for merchant gas supplies may enable greater cooperation with NEC and may reduce the depth/duration of an emergency.  (d)..’securing of effective competition: (i) between relevant shippers’…  Provision of additional route to market for merchant gas supplies will provide shippers with greater opportunity to trade out imbalances.  Resultant market reflective cashout prices set within the emergency will improve cost reflectivity and cost targeting and encourage shippers to take actions to avoid an emergency or to minimise the extent &/or duration of an emergency.  (e)..’provision of reasonable economic incentives for relevant suppliers to secure that the domestic customer supply security standards are satisfied as respects the availability of gas to their domestic customers’…  Market based dynamic cashout prices set throughout the emergency will improve the ability of the regime to deliver this objective.  The Proposal addresses the immediate concerns expressed at the recent Ofgem chaired workshops and is achievable in the near term.

8 Supporting Changes  A number of changes to Section Q4.1 ‘Suspension of certain provisions of the Code’ are being suggested as ‘housekeeping’ and/or supporting measures for the Proposal.  The Proposal seeks to remove the following clauses from the UNC.  Q4.1.1(b) – the ability to suspend Section C –Nominations provisions  Q4.1.1(c) suspension of the provisions relating to the use of the OCM.  Q4.1.1(d) deferment of the Exit Close Out date.  Q4.1.1(f) suspension of Section H Demand Estimation provisions  Q4.1.1(i) suspension of Section G – SPA arrangements.

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