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This update provides the latest progress and discussion points on modifying the capacity agreement regime, including key aspects of the PARCA contract and potential changes to capacity release mechanisms. It also covers outstanding issues and proposed solutions.
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Planning and Advanced Reservation of Capacity Agreement – TX workgroup Update 7th February 2013
Purpose • Provide regular updates to Transmission workgroup on progress of cap/conn • Including high level overview of key discussion points • Detail on next steps and plan to progress
Refresher 1 NG NTS cap/con objectives include: • Develop an industry wide consensus of approach to modify the regime considering the impacts of the Planning Act (2008) • Work together with our customers to ensure we meet their requirements • Flexible lead times to adapt to specific projects • Some projects may require a DCO for both NG and the customer • Some projects may require a DCO for just the customer • Some projects may not require a DCO at all etc. • Define a transparent capacity and connection process that provides greater certainty and flexibility to our customers
Refresher 2 Key aspects of the PARCA contract include: • Developers and/or Users are able to reserve Quarterly NTS Entry and/or Enduring NTS Exit (Flat) Capacity through a PARCA • Underpins work required to investigate build / no build options to provide the required capacity • Phased User Commitment up to point of capacity allocation • PARCA stages provide natural break points • Reserved unsold returns to market where PARCA terminated • PARCA signatory funds revenue allowance to cover spend / committed spend where PARCA terminated • Capacity financially committed to upon allocation to the User associated to the PARCA • Allocation subject to terms and conditions of the PARCA (e.g. relevant demo info provided)
Refresher 3 Potential changes to existing Entry Capacity release mechanisms include: • March QSEC • Incremental release not guaranteed • Demand for incremental may be met through substitution, existing capability or through non-obligated release • Ad-hoc QSEC • No longer for new ASEPs • National Grid NTS invite Users to book unsold capacity that may otherwise be reserved through a PARCA • The need for such a process is currently under discussion • workgroup sentiment is that this may not be needed
Refresher 4 Potential changes to existing Exit Capacity release mechanisms include: • Enduring applications • Incremental release not guaranteed • Demand for incremental may be met through substitution, existing capability or through non-obligated release • Additional ad-hoc process • National Grid NTS invite Users to book unsold capacity that may otherwise be reserved through a PARCA • The need for such a process is under discussion • Workgroup sentiment that this is not needed
What did we cover in the last cap/conn workgroup? • Updated on outstanding workgroup NG actions • PARCA Funding arrangements • Options we have considered and proposed way forward including: • Financial commitment • Revenue driver approach • PARCA scenarios • Focussed on interactive projects and “what if” scenarios around this • Outstanding PARCA issues update and clarification – focus on this today • Material is available on our dedicated webpage: http://www.nationalgrid.com/uk/Gas/Connections/CapacityandConnections
Update on outstanding issues • We proposed a potential way forward at the workgroup on the current outstanding issues • Aim to develop business rules and the UNC modification based on the workgroup feedback • Our ambition is to formally raise the PARCA UNC modification (for subsequent workgroup development) by April 2013 • We need to consider system impacts (if any) e.g. is existing functionality fit for purpose. • The following slide details a potential forward on the outstanding issues
Outstanding Issues: Fine tuning of Capacity within the PARCA • Fine tuning of capacity should be permitted • The fine tuning range is provided by the PARCA signatory • Demo info will be required to detail the customers project design margins/uncertainty and provide rationale for them • Through stage 1a of the PARCA, NGG inform the PARCA signatory of whether the requested range can be accommodated. • In the unlikely event it can not be accommodated, NG provide a revised range at the earliest opportunity within stage 1a. • The PARCA signatory can review and adjust their initial capacity requirement within the permitted range • subject to demonstration information being provided
Outstanding Issues: Fine tuning of Capacity within the PARCA (2) • National Grid NTS have opportunity, through the PARCA lifecycle, to revise the permitted range and communicate why the revision is required. • e.g supply/demand assumptions could change etc • may provide additional or reduced scope for further refinement • Workgroup sentiment was that fine tuning should be permitted throughout the PARCA lifecycle • if further unsold capacity needs to be reserved this can occur up to the point of Capacity allocation as long as the need is sufficiently demonstrated
Outstanding issues: PARCA Window and Ad-hoc PARCA processes • A PARCA window would allow Users considering a PARCA to approach NG to allow multiple PARCAs to be considered together • e.g. interactive • Workgroup sentiment is that the PARCA window is not required. • National Grid NTS should be aware of imminent projects that could be interactive and hence can manage this accordingly • National Grid NTS will publish pertinent information to industry to inform views • This encourages potential projects to engage with National Grid NTS at the earliest opportunity. • PARCA triggered Ad-hoc Exit process - not required. • Existing ad-hoc provisions combined with clearly defined NG publishing obligations can be utilised by Users • PARCA Ad-hoc Entry process • Workgroup sentiment that this may not be needed. Users could factor the risk into their auction strategy
Outstanding Issues: Does the solution need to comply with EU Capacity codes? Agreed way forward: • Incremental EU rules in their infancy • Cap/Conn – seeking implementation by April 2014 • ahead of currently anticipated CAM, CMP and incremental implementation timeframes • PARCA solution should be progressed to include EU IPs • EU IP arrangements may need to change upon EU code implementation
Outstanding Issues: What scope should there be to amend the capacity delivery date? Agreed way forward: • Applies to both National Grid NTS and the PARCA signatory • National Grid NTS commit to an indicative capacity delivery date post stage 1a • subject to the terms and conditions of the PARCA e.g. planning consent may not be granted, demo info not provided etc. • As the project progresses, there may be scope to bring the date forward e.g. acceleration of planning activities or finessing of options • Only where valued & requested • must consider the impact on other Users
Outstanding Issues: What scope should there be to amend the capacity delivery date? (2) • NG NTS cannot, by default, extend indicative delivery timescales unless agreed with the PARCA signatory • subject to the PARCA terms and conditions e.g. has planning consent been granted • Constraint management principles apply where National Grid NTS do not deliver to the agreed delivery date (subject to the PARCA Terms and conditions) • We believe this commitment is necessary to provide increased certainty and value to our customers • PARCA signatory agrees to the capacity delivery date and formal capacity allocation date post stage 1a of the PARCA • The impact of the failure to provide demonstration information needs further consideration • Should the capacity delivery date move where demo info is not provided on time? • Should the capacity delivery date remain static regardless?
Next steps • Further workgroup scheduled for 27th of Feb • Potentially cover: • Initial thoughts on potential licence changes e.g. • lead times and incentives • revenue driver requirements etc. • PARCA contract – aim is for an initial draft of the PARCA contract to be available for discussion and review • Business rules and mod developed over the coming months