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Rule & Options Analysis - Background

Review Group 264 Rules & Options Analysis for BSSOQ Methodology Changes Post MOD244 16 th September 2009. Rule & Options Analysis - Background. xoserve tasked with investigating : Scenarios specifically concerning reducing booked capacity and enabling DM SOQ to be reflective of this reduction

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Rule & Options Analysis - Background

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  1. Review Group 264Rules & Options Analysis for BSSOQ Methodology Changes Post MOD24416th September 2009

  2. Rule & Options Analysis - Background • xoserve tasked with investigating: • Scenarios specifically concerning reducing booked capacity and enabling DM SOQ to be reflective of this reduction • As the DM SOQ is limited by not being less than the BSSOQ: • Investigate current rules and possible options for changing the derivation and timescales applied to the BSSOQ regime • Enable the DM BSSOQ and subsequent DM SOQ to be more reflective of current capacity requirements • Possibility to reduce DM SOQ more easily / frequently

  3. Rule & Options Analysis - Context • BSSOQ rules and processes are defined in UNC and UK Link • Changes to BSSOQ regime may require changes to UNC and systems • Timescales and changes therefore are considered to be longer term rather than short term (post winter 2010) • As a result, transitional relief options (options with ability to implement in short term) are available but limited • Defining Rules & Options analysis is still ongoing • Details presented give an indication of options being investigated and indicative details • Next stages re: progress to be determined

  4. Rule & Options Analysis - Current BSSOQ Process • BSSOQ reviewed during June each year • Represents peak day consumption for the previous winter (Oct – May) • New BSSOQ value applied 1st October • DM SOQ can be reduced during capacity reduction period (CRP: Oct – Jan) • DM SOQ cannot be confirmed lower than the BSSOQ • During the BSSOQ Review, INT sites can have an increased BSSOQ • Revision of the BSSOQ can take up to 2 years, therefore limiting the ability to reduce the DM SOQ

  5. Rule & Options Analysis – Considerations Analysis has considered the following: • Changes to BSSOQ regime should not introduce greater volatility in BSSOQ or DMSOQ where demand is stable • i.e. BSSOQ should reflect consumptions that contain all winter months to identify the peak • Reasonable constraints and incentives against unreasonable capacity profiling should be maintained • i.e. restrict ability to increase and decrease DM SOQ at any time • Provide a reflective SOQ and SHQ to DN’s that is fit for purpose (supply security / system planning) • Where BSSOQ timings have been changed CRP timings would also need to be changed to allow benefit to be realised

  6. Rule & Options Analysis – Option A • Change timing of annual BSSOQ Review and CRP • Shorten BSSOQ period to run from Oct 1st to Mar 31st • CRP changed to Apr 1st to Nov 1st (extended from 4 to 8 months) • Shortens ‘Winter’ period (removes April and May: estimate 35 sites impacted) • Allows quicker review and change of BSSOQ post winter period • Aligns charge rate impact of BSSOQ with other charge rate changes • Discontinue manual review of BSSOQ calculation (minimal impact) and update revised BSSOQ effective from April 1st • BSSOQ unchanged until next April (subject to appeals / ratchets) • Permit BSSOQ appeals based on more accurate historic data

  7. Rule & Options Analysis – Option A Cont. • Where demand is changing: • The Shipper could reduce their DMSOQ in April to new BSSOQ giving earlier reduction in charges / revenue by 6 months • FIRM – profiling as now, the Shipper could reduce DMSOQ in April and increase in October to accommodate ratchet incentives applying • INT – as no ratchet applies, behaviour will be similar to now (maintain April DMSOQ throughout) • Option would shift when Shippers will reduce their DMSOQ (from Oct to Apr) but should not alter the limited ability to profile DMSOQ • Costs / Timescales: £57k to £80k • Feasible for April 2011

  8. Rule & Options Analysis – Option B • Two BSSOQ Updates per year using shorter BSSOQ period • 1: Oct – Update BSSOQ based on UWP from Jan to May • 2: Apr – Update BSSOQ based on UWP from Oct to Feb • CRP would start in April, end in mid-winter • Where demand is changing: • Shipper could reduce DMSOQ in Apr and Oct to new BSSOQ giving earlier reduction in charges / revenue by 6 months and every 6 months • BUT – could introduce additional within year fluctuations in BSSOQ as both reviews do not consider full winter period (misses some winter months) • Costs / Timescales: £70k to £100k • Not considered to be feasible due to missing winter period

  9. Rule & Options Analysis – Option C • Two BSSOQ Updates per year using a full set of winter consumption periods • 1. Oct – BSSOQ based on UWP from Oct previous year to May current year • 2. Apr – BSSOQ based on UWP from Mar previous year to Feb current year • CRP would start in April, end in mid-winter • UWP based on periods that contain all winter months • Where demand is changing: • Shipper could reduce DMSOQ in Apr and Oct to new BSSOQ giving earlier reduction in charges / revenue by 6 months and every 6 months • Could introduce additional within year fluctuations in BSSOQ but only where actual peak demand is changing • Costs / Timescales: £70k to £100k (as per Option B) • Feasible for April 2011

  10. Rule & Options Analysis – Option D • Rolling BSSOQ Review • Each month update BSSOQ based on peak consumption from the most recent period that contains all winter months (in last 12 months) • CRP would continue all year (to enable benefit of BSSOQ change) • Where demand is changing: • The BSSOQ would be reflective of most recent peak demand • Could introduce fluctuations in BSSOQ and DM SOQ throughout the year • Profiling could occur but would have to be undertaken within the month. • Costs / Timescales; As Option C (£70k to £100k), anticipated to be more expensive due to additional system changes & risks due to update frequency • Possible long term Option

  11. Rule & Options Analysis – Radical Options • Radical Options - with more significant issues requiring investigation: • 1. Re-define BSSOQ as average winter day consumption of previous gas year • 2. Re-define the BSSOQ as AQ / 365 • Option 1 & 2 allow greater reduction / flexibility in SOQ due to a lower BSSOQ • 3. Discontinue or redefine the BSSOQ before MOD90 is implemented • Is BSSOQ value required? • Appropriate mechanisms need to be in place to maintain integrity of DMSOQ

  12. Possible Analysis – Transitional Relief – Option • Transitional / short term relief options are limited and would require investigation of feasibility, costs and appropriateness • Preferred option has been stated here • Require minimal system change & utilise current processes • Retrospective Rebate – where demand has been significantly below the prevailing BSSOQ for at least 12 consecutive months, issue a rebate • Based on difference between BSSOQ and peak daily consumption from 12 month period • And where Shipper has also retrospectively reduced their DMSOQ to the BSSOQ in last 12 months • Validate changes to monitor inappropriate behaviour

  13. Rule & Options Analysis – Next Steps • Additional areas to be considered? • Limited transitional / short term relief options available – progress? • Issue with feasibility and appropriateness of long term options – progress?

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