1 / 3

Force Majeure

Force Majeure. Existing FM situation: Up to 200GWh/d capacity shortfall due to the rejection of NG’s planning application for a PRI in Corse / Tirley area. Second Public Enquiry held July 2010 and awaiting Sec of State decision (DECC / C&LG joint decision). Mod 262 - rejected in Dec 2009

aletha
Download Presentation

Force Majeure

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Force Majeure • Existing FM situation:Up to 200GWh/d capacity shortfall due to the rejection of NG’s planning application for a PRI in Corse / Tirley area. Second Public Enquiry held July 2010 and awaiting Sec of State decision (DECC / C&LG joint decision). • Mod 262 - rejected in Dec 2009 • Lack of risk to NG revenue seems inappropriate • Incentive on shippers to challenge FM • Whether FM terms in UNC are comparable with other normal commercial terms? (To be dealt with under RIIO-T1) • Way forward – material value (>£0.5m/month) of delay • Mod is sufficiently well developed to go to consultation • Request that the Mod report could be heard at Dec’ 10 Panel • 15 days consultation / Best endeavours by JO / Short notice Panel

  2. Modification 3 4 9 • Generic solution for treatment of NTS Entry Capacity affected by FM, not geared to specific situation • Key elements of Mod: • If implemented, NGG would have the obligation to enter into an FM Option capacity management agreement : • Pays the Shipper an option premium for constrained registered capacityOption premium paid to Registered User = rebate affected capacity based on WAP of each Registered User @ ASEP * Constrained capacity of User (pro-rated) • Exercise the option on a daily basis when nom’n > constraint at zero exercise price • NG bear 50% of the cost via the Buyback incentive • Shippers bear 50% of the cost via Capacity Neutrality and Commodity • Applies to QSEC / AMSEC capacity at the time the FM was declared (prevents “gaming”) • If a shipper is successful in challenging FM then the option would be unwound by NGG, keeping the industry whole and shippers not gaining under this mechanism. • NG have indicated that this could be implemented within 5 days of approval

  3. Worked example Schematic of option • Option rather than Forward contract to avoid sterilising capacity (and potentially restricting flows) unnecessarily. • Where the option is exercised, capacity holders may still need to trade capacity in order to maximise flows (example given) • The capacity is fully sold out between A and B • This would effectively be pro-rated and NG hold an option O that would be prorated with A and B. • In (1), overall flows are below the constrained level and flows are unrestricted (B requires additional capacity to flow more) • In (2) the aggregate nomination exceeds the FM level so NG exercise the option O, reducing A and B to the pro-rated amounts. A would continue to flow the gas it wanted to and would sell some capacity to B to maximise ASEP flows. • The Option premium to A and B goes through NG’s capacity buyback incentive mechanism, giving a 50:50 split between NG and Entry Users at all ASEPs. • The Option exercise price on a day is zero Baseline A O O Cap s.t.FM A A A A A B B B A2B B B B Capacity 1 2

More Related