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Review Group 176

Explore a potential alternative formula utilising WCF and DAF instead of SND to estimate demand in gas markets. The suggested approach involves calculations for WCF and DAF, providing advantages such as reduced reliance on DN forecasts and greater neutrality. However, limitations include potential outdated data and slower evolution in line with actual AQs.

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Review Group 176

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  1. Review Group 176 Possible Alternative to use of SND in Demand Estimation

  2. Use of SND in the Formula • Demandt = AQ/365 x ALPt x (1 + (DAF x WCF) ) x SF • WCF (Weather Correction Factor – at LDZ level) = (Actual LDZ NDM Demand – Seasonal Normal NDM Demandt) Seasonal Normal NDM Demandt • DAF (Daily Adjustment Factor – at EUC level) = WSENSt/SNDt (for EUC) WSENSt/SNDt(for LDZ)

  3. Suggested approach - WCF • Use WCF = (Actual LDZ NDM Demand – Σ(AQEUC/365 x ALPt)LDZ) Σ(AQEUC/365 x ALPt)LDZ • i.e. Derive an approximation of Seasonal Normal Demand for the LDZ by applying the ALP for the day to total AQ/365 for each EUC • Options for frequency of calculation: Annual off-line calculation in September for new Gas Year Infrequent, easy Frequent, complex Monthly off-line calculation throughout Gas Year, reflect evolution of AQs Daily calculation, part of on-line Demand Attribution

  4. Suggested approach - DAF • DAF currently published in August for next Gas Year • DAF less sensitive to SND than WCF • Use DAF = WSENSt/ AQEUC/365 x ALPt WSENSt/ Σ(AQEUC/365 x ALPt)LDZ • Options for frequency of calculation: • During Spring analysis using prior year AQs • In September when AQ amendment window closes • Monthly to reflect evolution of AQs • Daily calculation – not necessary/desirable? • Suggest calculation in advance in Spring – greater accuracy not required

  5. Advantages Removes reliance on DN Forecasts AQs already visible to Shippers – more “neutral” No UKLink impact for annual/ monthly calculation Should reduce WCF values if SND is generally overstated Would complement a rolling AQ regime Disadvantages AQs based on historic data – out-of-date? Can’t reflect current trends Impact on UKLink for daily calculations Annual/monthly calculations may not evolve quickly in line with actual AQs Use of AQ and ALP – Summary

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