1 review group 166 review of necessary reform of nts offtake arrangements exit reform from an...
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Review Group 166Review of necessary reform of NTS Offtake
Arrangements
Exit reform from an interconnector perspective
Avian Egan
20th September 2007
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Exit reform from an interconnector perspective
Focus: Moffat exit point for RoI and SNIP interconnectors
Existing arrangements Key impacts of exit reform Commission for Energy Regulation appointment of BGN
as Single Party Designate Addressing adverse impacts Timing Summary
Coverage
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Transportation arrangements
PTL Agreement
SNIP transportation
Uniform Network Code
Code of Operations
Existing Moffat arrangements
MoffatTwynholm
Northern Ireland
Republic of Ireland
Isle of Man
SNIP
RoI interconnectors
NTS
Moffat AgreementsConnected System AgreementCapacity certification/ ticket to ride, ramp rates, notice periods, physical connectionMoffat Administration AgreementNomination matching, end of day Allocations
Operating Profile Notice (OPN) AgreementWithin day offtake profile notices
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Existing Moffat arrangements – High Level
Moffat arrangements developed to facilitate the trading of gas at Moffat, with no added risk to Shippers
Current arrangements work well
Serve Shippers both upstream and downstream of the Moffat Connected System Point
Serve as a robust model
The Agents’ roles are clear and well defined at Moffat
Matching nominations
Compiling aggregate matched end of day quantities
Delivering profiles to the upstream Operator
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Exit reform from an interconnector perspective
General points – existing arrangements Existing Moffat interconnector arrangements operate well No key problems and issues facing this stakeholder group under existing exit
arrangements Radical exit reform not sought by the Downstream players however:
As Downstream Operator, BGE fully recognise the Upstream Market process Downstream players are keen to ensure that the effective trading of gas at Moffat can
be maintained.
General points – exit reform Mod 116V gives rise to a number of serious issues to be addressed if exit reform is to be
implemented The objective of any revised exit reform proposal would therefore be to address these
shortcomings in an economical and efficient manner
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Exit reform from an Moffat perspective
Key concerns over Mod 116V exit reform
User commitment model
Security of supply Downstream markets reliant
on Moffat capacity Will NTS shippers make 4 year
commitments 3 years in advance? If not, existing capacity could be substituted
or required incremental capacity not built Market foreclosure Long term commitments are a barrier
for new players in downstream markets
Capacity certification Withdrawal cuts link between
downstream players and NTS exit capacity
Initial prevailing rights Using historic rights creates mismatched
upstream and downstream counter-parties at Moffat
Overrun rules Overrun user concept does not
accommodate a Non Exclusive Single Party
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Contractual and operational complexity Tension between pipeline operational requirements and shippers contractual obligationsAllocation of flex usage to shipper level Complex, difficult to establish reasonable rationale for allocation methodologyUse of OPN as flex product request Requires reopening of complex multi-party agreements already in placeUncertain product availability and usage Shipper booking criteria? Aggregate Moffat needs met? Cost and exposure?Price Difficult to determine flexibility product requirements Difficult to price Potential for ‘unreal’ market demand to inflate priceTransfer between exit points/ zones Uncertain availability in both short and long term
Exit reform from an interconnector perspectiveLinepack depletion/ flexibility product
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Costs incurred downstream
Complexity
Increased risk and exposure downstream
Impact on gas trading at Moffat
Implementation Timing
Exit reform from an interconnector perspective
Mod 116V exit reform: Key concern
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Commission for Energy Regulation October 2006 consultation and January 2007 decision documents Concerns re security of supply and market foreclosure Decision to pursue establishment of a Single Party (SP) to act as the aggregate booker of NTS
exit capacity for shippers downstream of Moffat Bord Gáis subsequently accorded status of “SP designate” by CER
Pending RoI Legalisation & possible European sin-off
Northern Ireland Authority for Utility Regulation (NIAUR) Position reserved – not committed to joining the SP arrangements
Ofgem Mod 116 decision letter recognises need for SP role
Department for Business, Enterprise & Regulatory Reform (BERR) To consult on exemption for SP
Addressing adverse impacts Development of the single party (SP) concept
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SP books flat NTS Exit Capacity at Moffat on behalf of RoI shippers (& Isle of Man) in accordance with rules approved by the CER
Rights to use SP booked exit capacity accorded to RoI shippers and their NTS counter-parties
No restrictions on NTS shippers directly booking Moffat exit capacity – continue to book directly for gas delivered at Twynholm
NTS Exit Capacity bookings
RoI shippers
NI shipperNorthern Ireland
Republic of Ireland
Isle of Man
SNIP
RoI interconnectors
NTS
NTS shippers
By SP
By NTS shippers
Addressing adverse impacts The non-exclusive “Single party” (SP) Overview
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Addresses concerns overSecurity of supplyMarket foreclosureCapacity certification withdrawal
RequiresInitial prevailing rights allocation to be subject to capacity certification Overrun arrangements suitable for a non-exclusive SPUNC to accommodate the Single PartyExemption for the Single Part under GB legislation
Addressing adverse impacts The non-exclusive “Single party” (SP) concept
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Potentially the SP could be overrun user at Moffat, liable for all overruns
This does not work where the SP is a “non-exclusive” booker at Moffat
Shippers not party to the SP arrangements could overrun their independently booked capacity, leaving the SP liable for the overrun charge
Option under consideration: Separate logical metersInvolves assigning capacity and gas flow allocations to separate SP and
“independent” meters
Addressing adverse impacts Overrun Rules
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Mod 116V apportions initial prevailing rights to NTS shippers based on historic capacity holdings
NTS Shippers at Moffat have such holdings based on certificates provided by Downstream Shippers.
This condition is part of current Moffat NG arrangements approved by Ofgem
SP require initial rights or would need to apply for incremental capacity, making the 4 year commitment to its full capacity holding
Can be addressed by making initial rights apportionment subject to the capacity certification process so that appropriate initial rights can be apportioned to the SP
Addressing adverse impacts Initial prevailing rights
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Exemption RequirementSP will not have GB shipper licence Requires exemption from the prohibition on unlicensed shipping activities BERR currently drafting a consultation document SP Exemption
UNC Modification RequirementUNC will require changes to accommodate the SP
Initial Prevailing RightsOverrun Rules
BGN are not party to the Uniform Network Code and hence cannot raise the SP required Modification Proposal
Addressing adverse impacts Accommodating the SP
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Flexibility product No current evidence of scarcity Monitoring of linepack depletion should be sufficient
SP Implications Extremely complex downstream of Moffat May necessitate development of an exclusive SP Uncertain that an exemption would be granted for an
exclusive SP
Exit reform from an interconnector perspective
Linepack depletion/ flexibility product
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Review group to deliver draft mod. proposal December 2007 Ofgem impact assessment and consultation Q1 2008 Decision subsequently (earliest late Q1 2008??)
Insufficient lead time for April 2008 implementation
Exit reform from an interconnector perspective
Timing
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Exit reform from an interconnector perspective
Summary
Mod 116V concernsUser commitment model Security of supply Market foreclosure Capacity certification Initial prevailing rights Overrun rules
Linepack depletion/ flexibility product Contractual and operational complexity Allocation of flex usage to shipper level Uncertain product availability, usage
and price Transfer between exit points/ zones Application at bi-directional points
(not a Moffat Issue)
Addressing adverse impacts
The non-exclusive “Single party” (SP) Revised overrun treatment UNC to accommodate the SP as an
exempt party Initial prevailing rights allocation to be
subject to capacity certification
Linepack monitoring sufficient, but for development of similar products
Extremely complex downstream of Moffat
May necessitate development of an exclusive SP
Uncertain that an exemption would be granted for an exclusive SP
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