developing capacity & connection processes long term non-firm capacity: draft business...

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Developing capacity & connection processesLong term non-firm capacity: Draft business principles

6th September 2012

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Long Term Non-Firm: Recap Allow new connections and existing site expansions access to the NTS ahead of timescales for

firm incremental capacity delivery, but only where NTS reinforcement is needed

Would provide greater certainty for customers Where customer has significantly progressed their project and NTS connection is ready,

but firm capacity delivery is beyond the first potential gas flow date Where customer project is ready ahead of schedule Where customer project doesn’t need planning consent so timescales are potentially

misaligned ‘In flight’ projects

Aimed at covering the gap between firm capacity delivery and first gas flow date

Option A: Long term off-peak exit / interruptible entry capacityIntroduces new capacity product, sold through auctions (adhoc or fixed)

Option B: Non-obligated firm capacity, with buyback optionReleased via non-obligated capacity mechanism with a buyback option contract attached

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Draft Business principles

High level principles

First draft only

Industry discussion needed to ensure ideas are developed into a workable solution for industry, consider: Are these options workable?

Are these viable alternatives?

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Process trigger

No

Yes

Customer signals incrementalcapacity requirement

NG NTS analyse & determine howrequirement could be met

In the case that NTS build isrequired, does customer require

early access to NTS?

Unsold firm?

Substitution?

NTS build?

Customer bids/applies for firmincremental capacity from the agreed

delivery date

Long term non-firm capacity release wouldbe considered for the ‘early capacity period’

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Long Term Non-Firm: Release criteria

Applies to both Option A & B

Only released where: An incremental signal has been provided and Earlier access to the NTS is required and NTS reinforcement required

Staged capacity release (annually), conditional upon: Demonstration requirements being satisfied (where a bilateral agreement is in

place); and There being insufficient unsold firm capacity available to fulfil the customer’s

capacity requirement for the year ahead (customer must purchase any unsold firm capacity where available)

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Option A: Draft business principles

Capacity Product Longer term release of Interruptible Entry and Off-Peak Exit Capacity Release via an annual adhoc process Subject to curtailment Likelihood of curtailment provided to the relevant user for the release period

Pricing ‘Pay as Bid’ pricing, with a reserve price

Duration Capacity released throughout entire ‘early capacity period’ Held once a year for (up to) a 12 month period Up to 12 Monthly blocks

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Option B: Draft business principles

Capacity Product Non-obligated firm capacity Release via an annual adhoc process Buyback option contract for all days on which capacity is held Likelihood of buyback provided to the relevant user for the release period

Pricing ‘Pay as Bid’ capacity pricing Zero option price + exercise price capped at price paid for capacity

Duration Capacity released throughout entire early capacity period (annually) Held once a year for (up to) a 12 month period Up to 12 Monthly blocks

Long Term Non-Firm Capacity Scenarios:How might it work in practice?

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Scenario 1 – Status quo arrangements

Buyback Period

Sold/Obligated Level

Request level

Firm capacity delivery date

Achievable firm capacity delivery

date

LTNF = Long term non-firm capacity

Time

Capacity

Quantity

Incremental Capacity

Situation: NG NTS unable to meet firm capacity delivery date and no permits to use

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Scenarios 2&3 – Status quo arrangements

LTNF


Request level

Scenario 2: NG NTS can meet firm

capacity delivery date but customer requests early

access

Scenario 3: NG NTS unable to meet

firm capacity delivery date,extend with permits

First gas date


Firm capacity delivery date extended by

permits



Time

Capacity

Quantity


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Scenario 4 – ‘PARCA’/Split Auctions & PCA

LTNF Period


Request level

First gas date Firm capacity delivery date

DemoDates

passed

All Planning Consents Obtained

Situation: Demonstration information satisfied and all planning consents obtained

Time

Capacity

Quantity



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Initial LTNF period


Request level

LTNF to replace delayed incremental

Original firm capacity delivery

date

Revised firm capacity delivery date due to

planning consent delay

NG NTS Planning consent obtained

Situation: Delay in obtaining NG NTS planning consent


First gas date

Time

Capacity

Quantity



Customer Planning consent obtained

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Proposed first LTNF period


Request level

LTNF to replace delayed incremental

Original firm capacity delivery date & revised first gas date

Revised firm capacity delivery date due to

planning consent delay

Customer Planning consent obtained

Situation: Delay in obtaining customer planning consent


Original First gas

date

Time

Capacity

Quantity



NG NTS Planning consent obtained

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Sold/Obligated level

Request level

Final Demo Date failed

Proposed LTNF period

– year 1


First gas date

Incremental capacity build &

release cancelled

Date LTNF would have been renewed

for new gas year

Proposed LTNF period

– year 2

Situation: Failure to provide demonstration information


Time

Capacity

Quantity


Planned Incremental Capacity (no longer to be

released at this stage)

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