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New gas shipper licence arrangements

New gas shipper licence arrangements. Gas Transmission Workstream 2 December 2010. Summary. After months of consultation in September 2010 the New Application Regulations and the Updated Guidance Document were published*: Introduction of new risk-based, three tier licence application process

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New gas shipper licence arrangements

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  1. New gas shipper licence arrangements Gas Transmission Workstream 2 December 2010

  2. Summary After months of consultation in September 2010 the New Application Regulations and the Updated Guidance Document were published*: • Introduction of new risk-based, three tier licence application process • Changes to the Revocation Schedule of all future licences • Discussion: should “traders” be required to have a licence? * These can be found on Ofgem website at http://www.ofgem.gov.uk/Licensing/Work/Pages/Work.aspx

  3. Why change the application process? Changes are designed to: • Mitigate risk of potentially fraudulent licence applications • Make the application process clearer and easier • Strike a balance between additional administrative burden on applicants and need to verify their serious intentions

  4. Tiered application – information requirements Existing New Information burden on applicant increases with Risk

  5. How to determine move to tier 2 and 3 Key areas that the risk assessment will take into account • unexplained omissions/discrepancies in the information (Ofgem will always take into account applicant’s explanation) • difficulty verifying information provided • any information relevant to our decision to grant a licence which comes to our attention during the application process • readiness/intent to use licence for purpose for which granted All licence applications will be scored against these criteria in order to decide the move to tier 2 and if necessary to tier 3* * For more details, refer to the tables on p. 16-17 of “Guidance for gas and electricity licence applications”

  6. Licence Revocation • The Revocation Schedule has been changed to better address the issue of unused and dormant licences. • All future gas shipper licences may be revoked if unused for 1 year (longer if licensee has physical assets) • In case of the licensee having ceased the activity the licence may be revoked immediately • Ofgem will not automatically revoke an unused licence and will always give the licensee the possibility for representation

  7. Distinction between “traders” and shippers • Currently the UNC makes no distinction between physical and non-physical traders and both are required to have a licence • A shipper is a person that “arranges with a gas transporter for gas to be introduced into, conveyed by means of or taken out of a pipeline system operated by the transporter”* • A non-physical trader (“trader”) does not arrange to convey gas across the GB transportation network * As defined under s5(1)(c) of the Gas Act 1986

  8. Ofgem view Ofgem consider that there is merit in making changes to the industry contracts to differentiate between “trader” and shipper • Removal of an entry barrier: greater competition • Consistency across all gas and electricity licences/Codes • Reduction in numbers of dormant licences BUT is the proposed change proportionate? We look forward to industry parties views on the matter

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