Transcript Emergency Cashout Prices and Emergency Curtailment Quantity

Emergency Cashout Prices and Emergency
Curtailment Quantity (ECQ) Adjustment
Ritchard Hewitt
Gas Code Development Manager
Decision Letter on Proposal 0021

Main points - Cashout Prices:
 “that the current arrangements potentially create
perverse incentives for shippers who are short of gas”
 That current arrangements “may encourage shippers to
move further out of balance to trigger an emergency”
 “There is a risk that the current arrangements will fail to
attract price sensitive sources of gas”
 “shippers have a weaker incentive to contract for
demand response”
“ “ – quotations taken from Ofgem decision document on Modification Proposal 0021
Decision Letter on Proposal 0021

Main points - Cashout Prices continued:
 SMP buy (*) “is likely to better reflect the
prevailing market price for gas”
 “Exposing shippers to SMP buy… will promote
the economic and efficient operation of the
pipeline system”
 Clarification of treatment of OTC Trade
Nominations (*) during emergency stage 2
 However concerns expressed regarding small
volumes
* See UNC for definition of this term
Decision Letter on Proposal 0021

Main points – Interruption Volume adjustment.
 ”this element of the modification proposal in
principle better facilitates the relevant
objectives” but,
 “Critical improvement” areas:


Expansion to include Firm System Exit Points (*)
Inclusion of treatment of disputes in relation to the
ECQ
ECQ – Emergency Curtailment Quantity includes curtailment of
flows at either or both Interruptible and Firm System Exit Points
* See UNC for definition of these terms
Proposed developments of 0021 proposal
to address “Critical” improvements

Expansion of the proposal to include all System
Exit Points except Non Daily Metered and Priority
Loads*
 Inclusion of new dispute resolution process for the
ECQ element of the Proposal. Based on existing
resolution process set out in UNC
 Clarification of treatment of OTC Trade Nomination
process during stage 2 and 3 of a Network Gas
Supply Emergency (*)
* See UNC for definition of this term
Other changes proposed

Inclusion of requirement for the Relevant
Transporter to calculate ECQ and pass to Transco
NTS.
 ECQ information, by System Exit Point (*), to be
made available to Users after the Gas Day (*) to
support dispute process including information
describing the basis of the methodology used to
calculate ECQ.
* See UNC for definition of this term
Options for ECQ calculation

Proposal to include all DM System Exit Points
 Proposal to include “best estimate” requirement on
Relevant Transporter
 Possible options for assessing ECQ
 Steps



OPN
Based on Historical information (D-1, D-7 etc)
SOQ * % peak day
Dispute process

Replicate current UNC disputes process.
 To cover ECQ value
 Information released by Relevant Transporter after
the day to inform this process.
Marginal Cashout price
Ofgem Decision letter states that “exposing
shippers to SMP Buy …. rather than 30 day average
SAP will promote the economic and efficient
operation of the pipeline system”
 Issues raised by respondents to 0021 consultation
 Small volume setting SMP buy
 Link to electricity regime decisions

Marginal Cashout price

Small trades setting SMP buy has been
acknowledged as less of an issue in the gas regime
than the electricity regime.
 Previous statements made by Transco NTS that it
will take all efficient and economic actions. This
assessment includes having a reasonable
expectation that such trade will have a materially
beneficial effect on the system balance position.
 Other Marginal price models would need further
assessment and development.
Marginal Cashout price

Transco NTS continues to believe that SMPbuy
and SAP dual price emergency cashout provide the
best combination of incentives both to those shippers
who are short and those who are long to both avoid
the emergency and to then use the OTC Trade
Nomination facility during stage 2 and 3.
 SMP buy also provide the best incentive for any
trades taken by the Residual System Balancer prior
to the emergency to be delivered.
Medium term developments not part of
Urgent Proposal

Inclusion of ECQ calculation methodology in the
UNC.
 Review of Section Q – already a Transmission
Workstream Topic.
 Other Marginal Price models
* See UNC for definition of this term
Timetable

Raise Urgent Mod shortly
 If accepted consult over August
 Implementation for this Winter
 Possible industry meetings during consultation
phase to inform responses