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Inclusion of Historical Contracts in Gas Transmission Charging Regime

This proposal suggests including existing contracts in the calculation of the Fixed Charge Component (FCC) and Reference Price Methodology to ensure compliance with TAR NC and prevent distortions between existing capacity holders and new capacity bookings. Energy UK analysis shows the significant impact of excluding existing contracts, particularly in the enduring period. The recommended solution is to amend the current proposal or incorporate this modification into the existing workgroup.

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Inclusion of Historical Contracts in Gas Transmission Charging Regime

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  1. UNC 0621L:Amendments to Gas Transmission Charging Regime Proposer: Christiane Sykes, Shell Energy Europe Panel Date: 26 April 2018

  2. Why change? (1) • As presented by Energy UK at the 4 April 0621 Working Group, the treatment of Existing Contracts in the Reference Price Methodology raises a number of issues in relation to: • Compliance with the TAR NC • Furthering the relevant objectives and relevant charging objectives • Shell Energy Europe has proposed this alternative modification to National Grid’s 0621 proposal to include existing contracts in the calculation of the FCC and the Reference Price Methodology to: • Enable TAR NC compliance • Better meet the Transporter’s Relevant Objectives are furthered

  3. Why change? (2) • Mod 621 and currently all variants take the existing contracts out before the model is run, which leads to relatively higher capacity charges for new capacity bookings. • In the enduring period it is expected that the FCC value will be substantially lower than in the transition period when it is the obligated capacity level. • This means that in the enduring period the FCC value minus existing bookings will result in less capacity to recover the allowed revenue from.

  4. Why change? (3) Energy UK analysis shows the rather extreme impact of excluding the existing contracts particularly in the enduring period. Whilst accepting the impact will be less in the enduring period due to reduced levels of existing contracts and revenues associated with them. This analysis does not include interim contracts.

  5. Options • Proposed alternative modification to include historical contracts in the CWD calculation to prevent undue distortions between existing capacity holders and shippers purchasing new capacity. • Alternatively, National Grid could amend their proposal. Should they do this, Shell Energy Europe would withdraw this proposal.

  6. Solution • Include historical contracts in the CWD calculation to prevent undue distortions between existing capacity holders and shippers purchasing new capacity. • This issue has been raised on numerous occasions at the 0621 Working Group and analysis provided by Energy UK has demonstrated the distortion between existing capacity holders and parties purchasing capacity in the future.

  7. Recommended Steps • The Proposer recommends that this modification should be: • Incorporated into the existing 0621 Workgroup so it can be considered alongside the other alternative modification proposals.

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