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LTSEC summer auction

This document outlines the necessary amendments and requirements to enable an early 2006 LTSEC auction. It includes details on the UNC Mod Proposal, IECR review and consultation, and investment lead times.

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LTSEC summer auction

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  1. LTSEC summer auction Transmission Workstream 6th April 2006 Dave Adlam, National Grid NTS

  2. LTSEC Auction timetable • Currently runs in September (UNC obligation) • An earlier timetable may be beneficial because: • Greater notice of requirements for incremental capacity • Potential to reduce the requirement for the request for extension to lead times under the IECR • Align with TBE process • Greater information to formulate supply and demand position • Annual auction would potentially be better in May • Can’t achieve it this year • Uncertainty for 2007 onwards

  3. Requirements to enable an early 2006 LTSEC auction • Amendments required to allow an early 2006 LTSEC auction • Approval of UNC Mod Proposal • IECR review and consultation • Extension to investment lead times consultation

  4. UNC Modification Proposal • UNC Modification Proposal • To include transitional legal text to enable an early auction this summer [July] • Workstream comments on draft proposal? • Support for a 10 day consultation

  5. Requirements to enable an early 2006 LTSEC auction • IECR • Commence IECR review in early April (draft issued to workstream) • Introduction of a methodology describing how the incremental costs will be generated each year. • Submit to the Authority by beginning of May • The proposed changes for the IECR are • Introduction of a methodology to determine the future cost of investment • Amendment from Transco to National Grid

  6. IECR Proposals • Introduce a Methodology to determine the future cost of investment • Currently the IECR contains a table which indicates the cost (in £m per km) of future investments • National Grid undertakes work to establish these values each year and are affected by:- • Steel Prices • Construction costs • Inflation • The proposal is to replace the existing formula with a methodology that demonstrates how these values are derived.

  7. Investment Cost Methodology • National Grid would utilise projects that have been undertaken in the last 4 years and are planned and projected to complete in the next four years as a basis for deriving the cost of the release of any incremental capacity • Produces an average cost for each project per metre, dependent on pipeline diameter • This data is normalised, by use of the Structural Steelworks Labour Price costs index according to the construction year to take account of changes in • Steel Prices • Construction Costs • Inflation

  8. Investment Cost Methodology • Once the costs have been normalised the values are plotted onto a scatter graph and a trend line is drawn between the data to establish the values that will populate the pipeline cost formula.

  9. Investment Cost Methodology £/m range of existing schemes Linear regression Cost per metre £ Values for Trancost formula Pipeline Diameter (mm)

  10. Pipeline Cost Formula Current Formula Pipeline cost £m per km = 0.000407 * diameter (mm) + 0.38561 / km Revised Formula Pipeline cost £m per km = 0.0012507 * diameter (mm) – 0.01507 / km

  11. Requirements to enable an early 2006 LTSEC auction • Request to adjust investment lead times consultation • Requirement to amend lead time to ensure efficient delivery of incremental capacity • Finalising our requirements

  12. Next Steps • UNC Mod Proposal • Submitted to April Mod Panel • IECR annual review & Consultation to extend investment lead times • Released for consultation shortly • 28 day consultation

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