Modification 501 slides for Workgroup

1. Modification 501 slides for Workgroup Lesley Ramsey Matthew Hatch

2. Background Currently, commercial arrangements for gas flows at Bacton ASEP, (both interconnectors and off shore production) are covered by the provisions of the UNC. EU Codes introduce rules to apply to IPs To ensure CAM/CMP procedures are only applied at Interconnection Points (IPs), the existing BACTON ASEP will need to be split into two new ASEPS Bacton UKCS ASEP Bacton IP ASEP Existing UNC processes would continue to apply at the new Bacton UKCS ASEP CAM/CMP process will apply at Bacton IP ASEP 2 2

3. EU Regulation -requires changes to capacity arrangements Continues to be covered by GB UNC FIELD Production FIELD Production Bacton UKCS Terminal Sub Terminals FIELD Production FIELD Production BBL ST IUK ST To be covered by EU Regulation

4. Requirement to split existing holdings between the two new ASEPs [June 2015] NGG issue Invitation Letter Shippers indicate where existing Bacton holdings are required Further invitation letter to again indicate where existing holdings required Are aggregate level below obligated levels Requests are aggregated and compared to obligated levels Are aggregate level below obligated levels NO YES NO YES Requests pro rated Requests allocated in accordance with Shipper requests 4 4

5. Main principle Following the reallocation of existing capacity between the 2 Bacton ASEPs Users will : hold the same amount of NTS Entry Capacity in aggregate (at the two new Bacton ASEPs) as they currently hold at the existing Bacton ASEP be liable for the same costs at the 2 new Bacton ASEPs as they currently are at the existing Bacton ASEP (under the current charging methodology) 5 5

6. Proposed timeline for the Bacton Reallocation process Existing UNC processes RMT&TSEC and Daily auctions continue for each month Once Bacton Reallocation process is complete, re-instate relevant UNC processes Mar 2015 QSEC auction held Need to suspend RMT&TSEC and Daily auction for Nov at Bacton ASEP Need to stop Capacity Transfers at Bacton once new process begins Mar 2015 QSEC auction allocated Feb 2015 AMSEC auction held 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov New processes Write out with reallocations (where determined) hold second process if necessary Write out with reallocations from final process if necessary 10 days after QSEC auction is allocated Invite Users CAM implemented Inform Users of any new charge types or changes to invoices Inform Users of new ASEPs following Ofgem direction of GT Licence changes Final Capacity Reallocation if necessary First Capacity Reallocation 6

7. Obligated levels at Bacton Entry Point Obligated level of capacity at the existing Bacton ASEP (Table 6 of Special Condition 5F of GT Licence) is : 1783.4 GWh/d The creation of 2 new points and obligated levels will require Ofgem to issue a Section 23 notice. The October 2013 Ofgem Open letter suggested the following: Bacton UKCS 481.4 GWh/d and Bacton IP 1302.0 GWh/d The final values in the GT licence could be different, but the Ofgem Open letter values have been used in the following examples 7 7 7

8. UNC processes to be suspended • From [June – October 2015], whilst the reallocation process is taking place, the following processes will be suspended • Transfers of NTS Entry Capacity (TPD B5) for the period 01 November 2015 onwards • New Capacity Constraint Management agreements (TPD B2.8) for the period 01 November 2015 onwards • There will be no October 2015 RMT&TSEC auction for November 2015 NTS Entry Capacity at Bacton ASEP • There will be no relevant daily auctions held in October 2015 for November 2015 NTS Entry Capacity 8

9. Invitation Letter Invitation letter issued requesting that Users signal how they want their existing registered NTS capacity at Bacton to be reallocated between the two new ASEPs Issued following Feb 2015 AMSEC and Mar 2015 QSEC Invitation letter will contain User’s current capacity holdings at existing Bacton ASEP A proforma for the User to indicate quantity of capacity to be allocated at each new ASEP NTS Entry Capacity requested at the two new ASEPs should be equal to the existing holdings held at the Bacton ASEP for each relevant period Completed profoma to be faxed back to NGG by [26 June 2014] 9 9

10. Existing holdings • Example of Users holdings over all the QSEC auctions over the quarters 1 October 2016 until 30 September 2018 are as per the table below: 10 10 10

11. Reallocation If the Initial Capacity Reallocation fully reallocates all the existing Registered NTS Entry Capacity to the two new ASEPs then NGG will reallocate on Users behalf as per Users request User will not be required to undertake any actions If Users do not respond by the required date then the default will be reallocation between the Bacton UKCS ASEP and the Bacton IP ASEP in the same proportion as the Obligated levels at the two ASEPs. 11

12. Eg -Requests aggregated and compared to baselines Obligatd level 1302Gwh Obligatd level 481.4Gwh • For the other four quarters, the User requests will be allocated as requested as the aggregate requests are below the Obligated levels • The aggregate requested level at the UKCS ASEP are above the Obligated level of 481.4Gwh 12 12 12

13. Final Capacity Reallocation Where Users have signalled an aggregate level of capacity > obligated level for any Months/Quarters to the two new ASEPs NGG will issue on [3rd August 2015] another Bacton capacity reallocation invitation for relevant months/quarters to give Users another opportunity to indicate where they would wish their Registered NTS Entry Capacity rights to be held in future This final capacity reallocation will take place by [14th September 2015] The whole process is anticipated to be completed by [28th September 2015]. 13

14. Final Capacity Reallocation Obligatd level 1302Gwh Obligatd level 481.4Gwh • The requests in the quarter beginning 1 January 2018 will now be allocated in full as they are below the two Obligated levels • After the Final Capacity Reallocation, there are still three quarters where the Users aggregate requested level of capacity at the UKCS ASEP is above the Obligated level (481.4Gwh), so pro-ration will take place for those quarters 14 14 14

15. Pro-ration Example 15

16. Pro-ration • User requests are pro-rated back to the Obligated level at the UKCS ASEP in the three quarters highlighted and the remaining amount of requested NTS Entry Capacity is reallocated to the IP ASEP 16 16 16

17. Charges Users will be liable for the same charges (at the two new Bacton ASEPs) as they currently are at the existing Bacton ASEP under the current charging methodology A weighted average price for the capacity for the relevant periods will be used (calculated for each User) Note: original clearing price of relevant auction 17

18. Assumed QSEC clearing prices to calculate WAP • Consider the quarters from 1 October 2016 until end of September 2018 • The following table shows example clearing prices which were set in the three different QSEC auctions: 18 18 18

19. Assumed User holdings at Bacton ASEP • The User holdings in the three QSEC auctions over that period are shown in the table below: 19 19 19

20. Assumed User holdings at Bacton ASEP - £s • The following table shows the charges which the Users are liable for from each of the QSEC auctions: 20 20 20

21. Assumed User holdings at Bacton – User WAPs • So the individual User weighted average prices can be calculated from the original QSEC auction clearing prices for the relevant periods • And these WAPs will be used during the Bacton Reallocation process • at both the Bacton UKCS and Bacton IP ASEPs 21 21 21

22. Results of the Reallocation Process £s • Users are therefore liable for the same financial commitment for their NTS Entry Capacity rights at the two new ASEPs as they were at the original Bacton ASEP 22 22 22