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New gas shipper licence arrangements

Overview of changes in gas shipper licence application process, including tiered application, risk assessment, revocation schedule, and distinction between traders and shippers. Find more details and resources on Ofgem's website.

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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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