Hannah Nixon
Total Page:16
File Type:pdf, Size:1020Kb
National Grid House Warwick Technology Park Gallows Hill, Warwick CV34 6DA National Gas Emergency Service - 0800 111 999* (24hrs) *calls will be recorded and may be monitored Chris Brown Steve Fisher Head of Gas Transmission, Gas Networks Gas Charging & Capacity Ofgem Development Manager 9 Millbank London [email protected] SW1P 3GE Direct tel +44(0)1926 65 3428 www.nationalgrid.com 29 April 2016 Dear Chris, Notice of Final NTS Exit (Flat) Capacity Charges effective from 1 October 2016 Indicative NTS Exit (Flat) Capacity Charges for the 2016 Annual Application Window for Enduring Annual NTS Exit (Flat) Capacity This notice is issued in line with National Grid Gas (“National Grid”) Transporters Licence in respect of the NTS and our obligations contained in the Uniform Network Code in relation to changes to transportation charges and to the annual application for Enduring Annual NTS Exit (Flat) Capacity. Contained in this notice are: i. Final NTS Exit (Flat) Capacity Charges applying from 1 October 2016. ii. Updated indicative NTS Exit (Flat) Capacity Charges for Annual NTS Exit (Flat) Capacity for Gas Years 2017/18 and 2018/19. iii. Initial Indicative NTS Exit (Flat) Capacity Charges for Gas Year 2019/20 published ahead of the 2016 Annual Application for Enduring Annual NTS Exit (Flat) Capacity which will form shippers’ user commitment to NTS Exit Capacity requested in July 2016. iv. NTS Exit Capacity charges relating to Interconnection Points (IPs) The charges have been calculated in accordance with the Gas Transmission Charging Methodology (UNC Section Y). They have been set using National Grid’s Transportation Model, based on the expansion constants shown in Table 1; updated information on the target revenue recoverable through Exit charges; the transmission network; and the demands and supplies contained in the Gas Ten Year Statement 20151. 1 http://www2.nationalgrid.com/UK/Industry-information/Future-of-Energy/Gas-Ten-Year-Statement/ Page 1 of 11 Table 1 : Expansion Constant2 Gas Year Expansion Constant (£/GWhkm) 2016/17 2830 2017/18 2918 2018/19 2994 2019/20 3092 1. Final NTS Exit (Flat) Capacity Charges for 1 October 2016 NTS Exit (Flat) Capacity charges are normally updated once a year in October. As part of NTS Exit Reform, the timing for the release of final NTS Exit (Flat) Capacity charges effective from 1 October has been brought forward to allow this information to be used by the gas distribution network (DN) companies in their own charge setting activities and to benefit the industry as a whole by providing more advance notice of final charges. This section of this notice gives details of NTS Exit (Flat) Capacity charges effective from 1 October 2016. The Transportation Model for gas year 2016/17 (1 October 2016 to 30 September 2017) has been updated to reflect changes in supply, demand, the network, target revenue (see Table 2), and baseline Exit Capacity. Whilst each of these parameters affects charges, this note summarises the main changes that have driven the charges for 2016/17 compared to 2015/16. 1.1 Changes from Current Charges NTS Exit (Flat) Capacity charges effective from 1 October 2016, for each NTS Offtake, are shown in Appendix 1 to this notice (see Column A). Compared to current charges, most Exit Capacity charges have increased. Exit Capacity charges are set annually from 1 October, with charges set such that they aim to recover the TO allowed revenue within the formula year therefore essentially being set for 12 months to recover 6 months revenue (Oct-Mar). Even though the TO allowed revenue has increased for 2016/17 (£800m) from 15/16 formula year (£749m) the nature of how Exit Capacity charges are set mean the change in the target revenue for setting October 2016 charges is much higher than the difference in the allowed revenues ie Exit Target increased by £144m whilst the overall TO MAR increases by £51m, see Table 2. The change in target revenue has increased the charges by 0.0056 p/kWh/day subject to minimum rates. Further information on these changes can be found in our Charge Setting Report 3. In addition to these non-locational effects, NTS Exit Capacity charges in the South West and South East have increased. Forecast peak demands have fallen hence supply is decreased to match demand within our model. (Peak demand fell by 11% in the Demand Statements published in May 15 following a review of the composite weather variable and climate change methodology). Forecast Beach supplies have reduced principally at Teesside (as TYS 2015), with smaller reductions elsewhere, but there is a large decrease in LNG importation needed to match supplies to demand. These changes increase charges in the locality of the South West (close to Milford Haven LNG) and South East (close to Isle of Grain LNG) as the demands are not met by local supplies meaning that more of the NTS is utilised hence increasing the 2 Expansion constants for calculating exit capacity prices are fixed once set for each Gas Year 3 Quarterly Charge setting Report Indicative October 2016 charges will be made available shortly at: http://www2.nationalgrid.com/UK/Industry-information/System-charges/Gas-transmission/Tools-and-Models/ Page 2 of 11 charges. Similarly charges in the North West and North have reduced due to an increase in supplies from St. Fergus. On average the Exit Capacity charges have increased by 0.0051 p/kWh/day. However, the South West will see increases up to 0.0140p/kWh/d. The potential changes were highlighted in the Notice of Changes to Charges at 1 April 2016. 1.2 TO Exit Commodity Charge NTS Exit (Flat) Capacity for 2016/17 has not been booked up to the baseline. Therefore, to ensure the correct total revenue recovery from exit shippers, the TO Exit Commodity charge will apply from 1 October 2016. For further details on this charge please see our Indicative Notice of Changes to Commodity Charges which has also been published on 29 April 2016. The Final TO Exit Commodity charge will be confirmed at the end of July when additional information from the July Application Window is available. 2. Indicative Exit Capacity Charges for 2017/18 to 2019/20 National Grid’s new RIIO-T1 price control took effect from 1 April 2013. Indicative NTS Exit (Flat) Capacity charges for the period 2017/18 to 2019/20 have been prepared based on the allowances in the Licence introduced under RIIO-T1. However, since not all the income streams are known with certainty ahead of time, for example, inflation, incentive performance and cost-pass through adjustments, there is a degree of uncertainty in the allowed revenue and therefore also charges. 2.1 NTS Exit Capacity charges Indicative NTS Exit (Flat) Capacity charges for the years 2017/18 to 2019/20 for each NTS Offtake are shown in Appendix 1 (see columns B, C and D respectively). Forecast allowed TO Exit revenues are the main effect driving changes to Indicative NTS Exit (Flat) Capacity charges from 2016/17 onwards. Table 2 shows our forecasts for TO Exit allowed revenues. Table 2: TO Exit Allowed Revenues NGG 2015/16 2016/17 2017/18 2018/19 2019/20 Transmission Owner (TO) £m £m £m £m £m Revenue to be collected via Exit 328.21 360.1 385.2 380.0 403.5 charges Collection in first 184.29 144.32 215.77 169.39 210.59 half of the year Collection required in second half of 143.93 215.8 169.4 210.6 192.9 the year Annual figure for 4 287.85 431.54 338.78 421.18 385.90 charge setting The change in charges at most Exit points follow movements of modelled revenue forecasts. The variation between years is mainly due to the timing differences between financial and ‘gas’ (October to September) years which is used to set NTS Exit Capacity charges and this effect 5 has previously been discussed at the NTS Charging Methodology Forum (NTSCMF) . There 4 Revenue to be used in the Transportation Model 5 http://www.nationalgrid.com/uk/Gas/Charges/TCMF/2008 Page 3 of 11 are additional uncertainties around future forecasts of supplies and demand which have resulted in some changes to the charges over the 3 years of Indicative charges. 2.2 NTS Exit Capacity charges relating to Interconnection Points (IPs) Under the changes introduced under Capacity Allocation Mechanism (CAM) effective from 1 November 2015, Interconnection Points (IPs) have different capacity auction products, structures and timings. However, the Reserve Prices for the auctions are calculated using the same methodology as the Entry and Exit Capacity charges for non-IPs as described above. The final and indicative IP Exit prices for Capacity from 1 October 2016 are detailed in Appendix 2 of this document. For further details on these charges please see our Notice of NTS Annual Quarterly (Entry and Exit) Interconnection Point (IP) Reserve Prices which has also been published on 29 April 20166. Tools and Supporting Information Further information on revenue forecasts can be found in National Grid’s Quarterly Charging report available on our website at http://www2.nationalgrid.com/UK/Industry- information/System-charges/Gas-transmission/Tools-and-Models/ The Transportation Model used to create the 2016/17 to 2019/20 charges will be sent out to registered users. This allows the customers to familiarise themselves with how potential variations of inputs to the model may affect actual charges. For further information on how to receive the Transportation Model please refer to: http://www2.nationalgrid.com/UK/Industry- information/System-charges/Gas-transmission/Tools-and-Models/ If you have any questions about this notice, or require any further explanation of the charges or the charging methodology used to determine these, please contact Karin Elmhirst on 01926 655540.