Capacity Release Processes and Investment Planning

Transmission Planning Code Workshop 2

1st May 2008

Introduction

This presentation aims to outline the interaction between the following processes

Long term Entry Capacity release Offtake Capacity Statement process Annual investment plan cycle

Long Term Entry Capacity Release

Entry Capacity Auctions

Entry capacity released through a series of auctions to facilitate

Long term signals - market mechanism to inform investment Short term rationing - efficient allocation of scarce resource

Long term entry capacity auctions currently held in September each year

Entry Capacity offered up to existing obligated levels 10% held back for shorter term Additional demand for entry capacity can be signalled by users –

price steps published for capacity levels up to 150% prevailing obligated levels

Default lead-time for any further incremental obligated capacity released is 42 months

Two incentive mechanisms in Licence to vary lead-time (permits and accelerated release)

UNC Entry Capacity Products

Type of capacity BundlesTimeframe

(Capacity Years)

Firm

Quarterly (QSEC) Y+2 to Y+16

Monthly (AMSEC) Y+1 and Y+2

Monthly (RMSEC) Month ahead

Daily (DSEC)Day ahead and

within day

Interruptible Daily (DISEC) Day ahead

Incremental entry capacity release process (1)

Shippers participate in long term entry capacity auctions NGG publishes price schedule, capacity offered, lead-times, project

values prior to the auctions Bids placed in accordance with UNC rules to signal demand for entry

capacity

Information from auctions analysed after auctions close Incremental Entry Capacity Release (IECR) Methodology applied Entry Capacity Substitution (ECS) Methodology applied (if required)

If auction signal received for incremental obligated entry capacity

Licence requires NGG to make an “incremental obligated entry capacity proposal” to the Authority

Proposal must comply with IECR and ECS methodologies

Incremental entry capacity release process (2)

Incremental obligated entry capacity proposal states (for relevant ASEPs)

Amounts of firm entry capacity proposed as incremental obligated entry capacity and dates for release

Proportion of this which is substituted from other ASEPs

If Authority direct proposal Obligation to offer additional capacity for sale commences from date

in proposal

NGG may release additional capacity (non-obligated entry capacity) at its discretion

Timeline for Investment Planning - Entry

May June July Aug Sept Oct Nov Dec

end Nov

Shippers notified of

entry capacity holdings

1 Oct

Lead-time starts

(default is 42 months)

Sept

QSEC Auctions

Oct

incremental proposal made to Authority

preparatory Entry analysis confirmation of annual Plan

Dec

investment proposals

published in TYS

Nov

Authority decision

May-June

initial TBE Base Case available

July

Lead-times notified in auction

invitation letter

June-Aug

indicative Investment Plan developed against Base Case supply and demand and other

Supply Scenarios

Long Term Exit Capacity Release

Long Term Exit Capacity Release

Shippers and DNOs currently use different processes to book exit capacity

Described in the Exit Capacity Release Methodology Statement for the Interim and Transitional Periods (ExCR)

All users must provide user commitment via an Advanced Reservation of Capacity Agreement (ARCA) for long term flat capacity bookings that

Require specific reinforcement to the NTS and Are greater than 20 million therms/annum

DNOs may signal changes to their Offtake (Flat) Capacity, Offtake (Flex) Capacity and Assured Offtake Pressure requirements through the annual Offtake Capacity Statement process

If specific reinforcement is not required, Shippers may only book exit capacity from 6 months prior to the gas flow day

Offtake Capacity Statement(UNC Section B)

Signals DNOs 1 in 20 peak day requirements for Offtake Capacity and Agreed Operating Pressures

Runs in parallel to TBE process Initiated 1 June each year DNOs must submit OCS requests by 24 July Preliminary allocations by NTS required by 15 September OCS agreed by 30 September for the approaching gas year (Y) to

year Y+3

DNOs may revise bookings in future years

Long term demand forecast data (UNC OAD section H)

Process for sharing NTS demand forecast information between Transporters

Includes DN off-peak forecast data Used to inform TBE demand forecasts Split of LDZ offtake flows used as input to network analysis for off-

peak analysis

Information is not used for off-peak capacity bookings

Timeline for Investment Planning - Exit

May June July Aug Sept Oct Nov Dec

June-end July

OCS requests and

DN offtake forecasts

end July-Sept

Analysis of requests, preliminary allocations and discussions with

DNOs 30 Sept

DNOs notified of Offtake Capacity

holdings and AOPs

Exit analysis confirmation of annual Plan

May-June

initial TBE Base Case available

Dec

investment proposals

published in TYS

Timeline for Investment Planning – Entry and Exit process alignment

Exit and entry plan analysis undertaken in parallel

OCS bookings must be confirmed to DNOs ahead of decision on incremental entry capacity release

Any additional exit capability arising from entry investment will be considered in future years’ planning cycles

end Nov

Shippers notified of

entry capacity holdings

confirmation of annual Plan

end Sept

DNOs notified of Offtake Capacity

holdings and AOPs

Oct Nov Dec

Nov

Authority decision

Oct

incremental proposal made to Authority

Dec

investment proposals

published in TYS

Questions