Future Funding Allocation for Change Development

Action came about during discussions on BSC panel The analysis of change and development of potential service options

by Elexon is funded by parties impacted by the change proposal

Funding is by market share and agreed at the BSC panel

How might we in gas wish to fund the development of change?

Who drives change? Regulator/Government/Europe

GTs

Shippers

Multi-party

How could it work in gas?

Regulator/Government/Europe Funded by Industry as a whole, only those parties impacted, or just

the GTs through their allowance/clocking up mechanism?

GTs 100% GTs, only those who could benefit, or only those who will use

the service?

Shippers 100% Shippers, only those who could benefit, or only those who will

use the service?

Multi-party Those proposing the change, those who benefit, or those who take the

service?

Potential Ways to Fund Development Costs

Market share Supply points e.g. Mod 224 (DME) Energy use/throughput

Benefit of market share Transparent and easy to implement Links costs to the Mod

Invoice once development work is complete? Downside of market share – parties paying the most may benefit the least

from the change and visa versa

Only those who wish to use the service pay Requires an allocation mechanism

Market share/share of use of the service? Requires an early commitment by parties to take the service Others may join the service later – should they pay something towards

the development?

Potential Ways to Fund Development Costs

Bundling up the analysis and development costs and then invoicing the industry at a regular interval Requires an allocation methodology Cost of development and payment not as clearly aligned to a

particular Mod Requires regular reporting to and monitoring by the industry

An upfront central change fund Need to agree how much each party puts in Approval of draw down of funds required

How do we ensure fairness of use?

Links costs to a specific Mod What happens when fund is used up, or not spent?

With Funding Comes Responsibility

When it comes to direct funding arrangements for development of proposed Modifications, parties will require; Some formal say as to how the funding is used

Transparency of overall cost plus an understanding of their share

A way of ensuring money is not spent on “red herrings”

Consensual sanctioning to undertake development work

How do we achieve this? Does current governance provide a route?

Or do we agree funding principles first and then build governance around it?

Future proofing any solution