Review Group 316 – Review of Section I of the Offtake Arrangements Document (OAD)

1. Review Group 316 – Review of Section I of the Offtake Arrangements Document (OAD) Offtake Arrangements Workstream – 8th December 2010

2. Contents • Actions from previous meeting • Rules around OPN rejections • Flow Swaps update • Difficult Day scenarios • OPN Options • Pressures • Potential RIIO Impacts on OAD – Pressures and OPN process

3. Rules around OPN rejections

4. Rules around OPN rejections Note: further rejection reasons will be added as part of the enduring exit regime

5. Review Group 316 – Flow Swaps update Mike Wassell

6. Background • National Grid NTS and the DNOs may initiate flow swaps to manage their systems economically and efficiently. • From the 1st of Oct 2012 DNO User(s) are subject to NTS Exit (flat) Capacity overrun charges and any resulting deemed enduring applications. • Overview provided at last workshop to discuss Flow Swaps and a potential solution to swap capacity was briefly discussed to address this issue.

7. Potential High level Solution – views sought • Aim • For a National Grid NTS Initiated Flow Swap to not impact upon a DN Flat Overrun position in the enduring regime • How? • Transfer a quantity of Firm NTS Exit (Flat) Capacity entitlement from the reducing Exit Point to the Increasing Exit Point that, where possible, is equivalent to the National Grid NTS requested (and subsequently agreed) offtake flow rate changes. • The equivalent Firm NTS Exit (flat) capacity entitlement swap is calculated based on the requested duration of the Flow swap and the offtake flow rate changes requested. • E.g. 500,000 kWh/day flow rate request from offtake A to offtake B effective from 18.00 until the end of day. • Firm NTS Exit (Flat) Capacity swap would be 500,000 / 24 * 12 = 250,000 kWh/day equivalent of Firm Capacity

8. Potential High level Solution – views sought • Capacity swap occurs upon agreement of flow swap • DNO be able to view / notified of revised entitlements post agreement • Potential recording / approval via Gemini System • To avoid CV conversion issues, flow swaps could be requested in energy

9. Potential High level Solution – views sought • If calculated capacity entitlement swap is greater than capacity held by DNO User at reducing offtake, then the maximum possible firm capacity will be transferred across however will not cause the overrun position to be any worst Example - NTS request flow swap of 4 Units of NTS (Flat) Capacity Entitlement from Exit Point A to Exit point B Pre Flow Swap Flow 4 Flow 4 A B Capacity 3 Capacity 4 Flow 0 Flow 8 Post Flow Swap A B Capacity 0 Capacity 7

10. Example of Flow Swap Pre Flow Swap Flow 10 Flow 0 Exit Point A Exit Point B Capacity 10 Capacity 5 National Grid request a Flow Swap from NTS/LDZ offtake A to NTS/ LDZ offtake B of 7 Post Flow Swap Flow 3 Flow 7 Exit Point A Exit Point B Capacity 10 Capacity 5

11. Possible Solution • Equivalent capacity of the flow swap to be transferred from exit Point A to Exit Point B hence a reduction of 7 at A and an increase of 7 at B Flow 3 Flow 7 Exit Point A Exit Point B 7 3 Capacity 3 Capacity 12

12. Next steps • Refine potential solution?

13. Difficult Day Scenarios Mark Amos

14. Difficult Days • Transitional & Enduring processes comparison • Real day scenario • Constraint Management tools timing • Issues with inaccurate D1 forecasts

15. Difficult Days: CM Processes

16. Difficult Days: CM Processes cont.

17. Difficult Days: CM Processes cont.

18. = Actual Flow Difficult Day: Real Data = OPN Aggregate, All DNOs LDZ 01 LDZ 03 LDZ 02

19. Locational Buy Action: Time required to Request / Accept / Re-nominate 1 1 Surrender (Buyback): Hour bar + 1 notice following bid acceptance 1 1 Options Contract Exercise: Hour bar + 1 notice following bid acceptance 1 1 Constrained Storage: Min 1hr following revised demand forecast 1 Flow Swaps: User driven, possibility of action within 1 hour, potentially greater 1 Offtake Flow Reduction: Min 2 hrs notice following invitation/allocation 1 2 Off-Peak Scaleback: Min 4 hrs notice 4 Ops Margins: 6hrs notice for standby, 2hrs LNG otherwise 4 2 D Restricting Within-day Firm: Constraint forecast prior to 08:00 capacity auction Forecast Constraint Start Time Within-day CM Tools Timeline

20. Potential Outcome of Inaccurate D-1 Forecast • Constraint is not forecast and within-day Firm Capacity remains unrestricted, potentially exacerbating any constraint management costs (buybacks) • SFRN not issued, with the potential that further flexibility capacity is released within-day • The more time available to deal with a constraint (i.e. the earlier the forecast), the lower the cost associated with dealing with the constraint and the higher the liklihood the constraint will be avoided: • Issue notifications/invitations to Users early • Give Users more time to evaluate their turn-down/up options • More time to evaluate multiple options in GNCC

21. Pressures Glenn Bryn-Jacobsen

22. 0600 Pressure Process • Concept of 0600 pressure is based upon providing the maximum amount of linepack to the downstream system at the start of the gas day • OAD Section I seeks to establish a process to operationally manage the real time practical pressures for transporters to meet the obligation of being economic, safe and efficient. On days other than a 1 in 20 day an LDZ may not require the assured pressure – this forms the basis for an agreed pressure • Timing of the process / agreed pressures may impact OPN submission

23. Potential impact on OPN submission Agreed pressures process based upon ‘critical list’ of key offtakes for each DNO 2300 2400 D-1 0600 pressure assessed for key offtakes by 2300 Operational discussions as required Revised OPN submissions If DNO request a different pressure which can be provided then the agreed pressure will be revised NTS conditions (e.g. terminal/storage behaviour) may vary from operational assumptions leading to actual 0600 pressure differing from agreed pressures NTS may also advise DNO if significant occurrence on the NTS will affect offtakes which are not included on the agreed list NTS will contact DNO if an issue occurs which will cause significant deviance from agreed pressure (e.g. if experiencing issues with system) (DNO may contact NTS Gas Operations to review ‘critical list’) Agreed pressure is not revised after the 2300 process

24. OPN Options Mark Amos

25. OPN Options – “What is the problem?” • OPN Accuracy • Wish to maintain accuracy measure (tolerances) against prevailing OPNs • Current tolerances seem inappropriate • What can we do to improve accuracy? • Invest to ensure all OPNs are provided accurately? • Manage current resource to focus on improving accuracy for key offtakes? • Remove storage booking/risk from OPNs? • OPN Timing • Ensure OPNs provide sufficient warning of flow changes • Ensure NTS system takes into account OPNs provided in a timely manner

26. NTS Preferred Option • Make improvements to meet current OAD obligations & improve accuracy of OPNs that will feed into Enduring Exit Regime processes • Advantages • Maintains current obligations for provision of offtake info to NTS • Supports Enduring Exit constraint management tools • Minimises Constraint Management Costs for Community • Increased System Operator efficiency in other NTS processes through more accurate within-day modelling • Disadvantages • Costs? Practicality? Resources?

27. Discuss: How to achieve preferred option? • Can the NTS preferred option be achieved? • What are the potential blockers? • What prevents accuracy? • How to separate short term flexibility capacity booking from flow profile notification forecasts? • Issues related to pressure controlled offtakes? • Possible drivers for improvements • Additional info from NTS? • Incentives? • Charges?

28. Alternative options • Alternative options that could be explored; • Focus on key offtakes – may be some merit? • Aggregate at LDZ / Flex zones – not recommended by NTS • National Grid is happy to work with DNOs to explore cost / benefit analysis of alternative approaches

29. Provide accurate OPNs for key Offtakes? • Rather than providing OPNs for all offtakes irrespective of the size / criticality to system, focus scarce DN resources on ensuring accurate & timely OPNs are provided for key offtakes • Change OAD to enhance existing rules for key offtakes • Options include; • Volume based process i.e. accurate OPNs submitted for larger sites i.e. > x mcm/hour • Accurate OPNs are provided for a ‘critical’ list of x sites agreed by NTS & DNs against set criteria • Appropriate tolerances would need to be set for all key and less key offtakes

30. Next Steps • DNs to provide an understanding of forecasting processes • DNs to provide details regarding what the issues are that prevent accuracy • DNs to deliver preferred options with pros/cons

31. Potential RIIO Impacts on OAD Section I – Pressures & OPN processes Chris Shanley

32. Ofgem Capacity Working Group meeting held on 11th November • Ofgem want DNs and NTS to share information in order to deliver investment for capacity in Networks in the most efficient way across the NTS/DN interface • Ofgem are looking to develop output measures, indicators and uncertainty mechanisms to achieve this • To achieve an efficient investment outcome between the NTS and the DNs a number of factors may need to be considered: • NTS/DN investment • Diurnal Storage provision • DN interruption • Fit for purpose Capacity and Pressure processes • The interaction between capacity, flexibility and pressures • Other changes, i.e. UNC, Charges, etc.

33. Next Steps • Ofgem to produce initial strategy document in Dec 2010 • Strategy Decision document in March 2011 • Uncertain at this stage as to what the knock on changes to the UNC will be. • Where does this leave the OAD Section I Review?