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Discussion on Mod262 and next steps

Discussion on Mod262 and next steps. Seeking guidance from Modification Panel members. 17 December 2009. Rationale for Mod 262. What it was trying to achieve? Apply the principle that shippers should not have to pay for capacity that can’t be provided due to FM.

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Discussion on Mod262 and next steps

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  1. Discussion on Mod262 and next steps Seeking guidance from Modification Panel members 17 December 2009

  2. Rationale for Mod 262 • What it was trying to achieve? • Apply the principle that shippers should not have to pay for capacity that can’t be provided due to FM. • Application to all circumstances of FM at Entry and Exit • Simple, pro-rated mechanism to reduce capacity holding • Cost was to be smeared via SO or TO Commodity cost • Why was it rejected? • Was not considered to benefit consumers • No challenge mechanism for the NGG issuing an FM Notice • No incentive for NGG to sort out FM in a timely manner if there is an automatic redistribution of charges • Leakage of costs from Entry to Exit • Is it correct that NGG faces no FM risk?

  3. Areas to consider – principles • Principles to consider • Should customers pay for a service unavailable due to FM? • Is that normal commercial practice? • FM terms in UNC are weighted heavily in NGG’s favour • NGG should not benefit from calling FM • Appropriate tension between declaration of FM and shipper challenge to that FM. • Need to consider changes to UNC and Licence • Will minor changes to Licence be made outside TPCR ?

  4. Potential solutions • Consider change to the definition of Capacity so that it excludes capacity impacted FM. • Ensuring that it is properly targeted (unintended consequences) • How will NGG be compensated for lost revenues? • Incoming adjusting event? NGG to prove FM case • Amendment to FM provisions • More equitable terms • Applies to future instances of FM – doesn’t resolve this case • Route via System Management Principles Statement? • NGG need to use Buyback to resolve capacity constraints?

  5. Way forward • 17/12 Obtain opinion of Panel • Guidance on best way of dealing with this issue • Formalise Transparency requirement? • Changing capacity definition? • Considered pitfalls with this approach? • Other suggestions on tackling this? • 7/1/2010 Discussion at Transmission Workstream • Development within TW rather than separate workstream • Q2 2010 Seeking new arrangements in place

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