Impact of Code Modification Proposal 292 for Shipper/Suppliers.

Overstated AQs have the potential to significantly impact on the profitability of a supply business especially given the fact that distribution transportation charging has moved to become 95% capacity driven. Shippers, therefore, face charges that are determined mainly by the AQ at a site.

If there is a large negative differential between actual gas consumed and the site AQ value then there is potential for a shortfall in revenue from customer billing required to recoup transportation charges. For historical reasons the Network Code currently prevents shippers from amending small supply point (SSP) AQ values that are over or understated by less than 20%.

In practice this means that about 80% of the SSP AQ values cannot be challenged by shippers. Information published by Xoserve indicates that gas consumption is decreasing by 5% per annum and a 20% tolerance limits the ability of shippers to reflect this trend in a more representative site AQ.

Mod 292 proposes that a small supply point (SSP) tolerance of 5%, instead of the current 20%, will allow accurate AQ values to be established for a much greater proportion of sites and also lead to transporters having a better understanding of the network capacity needs.

A change to a 5% tolerance will inevitably lead to the potential for more amendments to be lodged in the SSP market. Estimates are that shippers may be able to amend around four times the number of SSP meter points with a 5% tolerance than can currently be amended with a 20% tolerance.

Mod 292 proposes that the transporter issues each shipper with a volume cap for the number of AQ amendments that can be submitted in each business day based on the number of meter points in the shipper portfolio subject to a de minimus level of 400 amendments per shipper per day.

The aim is to spread the load of amendments submitted to the transporter throughout the amendment window. Shippers will be required to submit amendments in a manner that does not breach the daily volume cap. It is likely that the daily cap will be pitched so that SSP shippers will need to be able to submit amendments on every business day in the amendment window to take full advantage of the opportunity offered by the proposal.

It is likely that the increased volumes of submitted amendments and, consequently, an increased use of the speculative calculator, will present new business challenges to both shippers and transporters alike.

B-Smart AQ Review Manager provides the gas shipper with a complete managed end-to-end AQR solution. Based on configurable tolerance limits the application automatically challenges National Grid Transco (NGT) AQ or Winter Consumption (WC) notifications where the shipper’s own data indicates that the NGT value is inappropriate.

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