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PARCA: Contractual Overview. TX Workgroup 27 th February 2013. Steve Pownall. Purpose of today…. Is to provide an overview of PARCA contract as follows: Pre-PARCA Assessment (proforma) PARCA Phased ‘Works’ Provision of capacity inc ‘fine tuning’ Customer fees and financial commitment

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PARCA: Contractual Overview

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PARCA: Contractual Overview

TX Workgroup

27th February 2013

Steve Pownall


Purpose of today…

Is to provide an overview of PARCA contract as follows:

  • Pre-PARCA Assessment (proforma)

  • PARCA Phased ‘Works’

  • Provision of capacity inc ‘fine tuning’

  • Customer fees and financial commitment

  • Information provision

    • Demonstration Data

    • Milestone Information


…but before we commence..

  • Going forward, for the purposes of the proposed ‘PARCA’ contract /arrangements ONLY, we intend to use a simplified naming convention:

    WasWill becomeWorks

    Stage 1a Phase 1 Needs Case/Technical Options

    Stage 1b Phase 2, Schedule A Strategic Options

    Stage 2 Phase 2, Schedule B Outline routing & siting

    Stage 3 Phase 2, Schedule C Detailed routing & siting / EIA

    Stage 4 Phase 2, Schedule D Proposed DCO Application

    Stage 5 Phase 2, Schedule E Submit DCO Application / hearings

    Stage 6 Phase 2, Schedule F Secretary of State decision

    Note: ‘Local Planning’ Works will be under Phase 2, Schedule G (to be defined)


Pre-PARCA Assessment

  • Customer to provide the following information to National Grid:

    • Details of customer

    • Proposed project location including facility site and NTS connection site

    • Indicative capacity requirement (profiled if appropriate)

    • Indicative capacity upper/lower range – for ‘fine tuning’ purposes only

    • For DNO Users; Pressure and Flex requirements

  • Used to populate the PARCA data items prior to signature by both parties

  • We anticipate dialogue between the customer and National Grid prior to the submission of this information


PARCA Phased Works - Overview (1)

The PARCA Works will be contained within two Phases

  • Phase 1 - Needs Case & Technical Options

    • Where no NTS reinforcement is required the PARCA becomes primarily a customer ‘Demonstration Data’ contract up to point of capacity allocation

  • Phase 2 - Statutory Planning Works either:

    • National planning (Planning Act 2008) for Development Consent Order

      • Schedules A - F (please see below)

    • Or:

    • Local planning

      • Schedule G [to be defined]

  • Note: Where we identify NTS reinforcement that requires planning, this could be met through either build or through non-build alternatives e.g. commercial contract or a combination of both. We anticipate that a proportion of the Phase 2 Statutory Planning Works will still need to be carried out under an alternative to a full-build option.


  • PARCA Phased Works - Overview (2)

    • Two natural ‘customer’ breakpoints

      • Following output from Phase 1

        • Customer to indicate whether it wishes to progress to Phase 2 - if NG indicates a Needs Case for NTS reinforcement

        • Where no NTS reinforcement is identified the customer will be required to pay a reservation fee; or the customer may bid through the capacity auction process

      • Phase 2 - following Secretary of State (or local authority) decision on our planning application

    • Customer may terminate PARCA Works at any time but liable for costs incurred (and committed) up to the point of termination


    PARCA Phase 1 Works: Establish Needs Case and Technical Options


    PARCA Phase 2 Works: Schedule A – Strategic Options works


    PARCA Phase 2 Works: Schedule B – Outline Routing and Siting works


    PARCA Phase 2 Works: Schedule C – Detailed Routing & Siting works


    PARCA Phase 2 Works:Schedules D, E and F

    Milestone Information: Provide customer with update ‘report’, reconfirm NG Project Plan timescales, as necessary for each schedule


    Provision of Capacity timeline (1)

    • Effective Date (ED):

      • At which the customer and National Grid sign the PARCA

      • From which National Grid agrees to undertake Phase 1 Works – will require the customer to pay the fee prior to commencement of the Works

    • Reservation Date (RsD):

      • The customer will have its capacity requirement reserved

    • Allocation Date (AD):

      • The customer (where not a User) must have nominated one (or more) User(s) up to 1 month prior to this date

      • The default date that is between 24 and 35 months prior to the Registration Date

    • Registration Date (RgD):

      • Date from which the User holds the capacity


    Reservation Date

    (RsD)

    Allocation Date (AD)

    Registration Date

    (RgD)

    RsD

    AD

    RgD

    Nominate user up to

    1 month before AD

    PARCA:

    Phase 1 Works

    Date from which the User holds the capacity

    Date PARCA signed by the customer and National Grid

    • Price

    • NPV (entry only)

    • Quantity (& range) reservation fee or security due

    • Capacity ‘tagged’ in Gemini from this date and no longer forms part of unsold.

    • Capacity allocated to the User

    • NPV (entry only)

    Default Allocation Date is between 24 and 35 months prior to the RgD

    Provision of Capacity timeline (2)

    Effective Date (ED)

    ED


    Provision of Capacity & ‘fine tuning’

    Fine tuning of customer’s capacity requirement:

    • Customers have requested the flexibility to ‘fine tune’ their capacity requirement prior to the capacity Allocation Date

    • As a project progresses, a customer will have more certainty as to its ‘final’ capacity requirement: linked to a number of factors e.g. chosen turbine manufacturer

    • We understand that capacity fine-tuning is an important customer consideration

    • Fine tuning will be allowed within an agreed upper and lower range

      • Pre-PARCA Assessment proforma

    • We will require the customer to provide demonstration data to support its request to fine tune its capacity requirement


    Customer fees and financial commitment (1)

    PARCA Phase 1 (Needs Case and Technical Options) Fee

    • Customer will fully fund the PARCA Phase 1 Works: fee approx £120,000 ~ £150,000 – similar principles to 0373 NTS Connection (excluded service, cost pass through)

    • Fee reconciled against outturn costs with ££ difference refunded to, or recovered from, the customer

      PARCA Phase 2 (Statutory Planning Works) - securitisation

    • Where Phase 1 Works identifies either:

      • Requirement for physical NTS reinforcement and, Local or National planning consent is required or;

      • Use of a commercial contract can be utilised to meet the customer’s capacity requirement then:

    • The customer will securitise 100% of the proposed Pre-Capacity Allocation Revenue Driver(see last TX Workgroup PARCA Funding presentation for details)


    Customer fees and financial commitment (2)

    Capacity Reservation Fee

    • This could be applied following the completion of PARCA Phase 1 Works, where the customer’s capacity requirement will be met entirely through existing system capability

    • In this scenario, the customer may secure its capacity requirement either by bidding in the capacity auction or by reserving through the PARCA

    • The Capacity Reservation Fee could be calculated:

      • Following PARCA Phase 1 Works and customer agreeing that it wishes to progress its project

      • The Capacity Reservation Fee will be calculated based on (to be discussed in March TX Workgroup)


    PARCA Funding (revised for ‘Phases’) Proposal for a Planning Act 2008 project

    Phase 1

    Works

    Phase 2 Works

    NTS Investment: Project Needs Case / Technical Options

    NTS Reinforcement (or other commercial method) required

    PARCA Phase

    Strategic Options

    Schedule A

    Outline

    Routing & siting

    Schedule B

    Detailed EIA

    Routing & siting

    Schedule C

    Proposed

    DCO Application

    Schedule D

    DCO Application

    and hearings

    Schedule E

    DCO submission

    & SoS decision

    Schedule F

    X

    Pre-Capacity Allocation

    Revenue Driver

    calculated by end of Phase 1

    Pre-Capacity Allocation Revenue Driver triggered and profiled over 4 years

    X

    Post-Capacity Allocation RD

    triggered &

    profiled over 3 yrs

    Post-Capacity Allocation Revenue Driver calc’d

    during Phase 2 Appendix 3

    X

    X

    All costs charged to PARCA Signatory

    Classified as 100% Excluded Services – no impact on Allowed Revenue

    Invoiced up front and reconciled

    Post Capacity Allocation RD triggered

    RD* added to Allowed Revenue and charged to industry via Transportation Charges

    Pre Capacity Allocation Revenue Driver triggered

    RD* added to Allowed Revenue and charged to industry via Transportation Charges.

    PARCA Signatory securitises value of RD

    Pre Capacity Revenue Driver runs up to DCO

    Funding / Charging

    17

    *Value of RD’s are reconciled with actual costs, reconciliations through Transportation charges.


    Information Provision

    Demonstration Data (from customer)

    • Please see overview…

    • Most categories seem to be required towards the end of the PARCA process e.g. Phase 2, Schedules E, F

    • We would appreciate views (please!) from all categories of our customers e.g. entry, storage and exit as to whether there might be additional items

      PARCA Phased Works – Milestone Information (from National Grid)

    • Please see overview…

    • The proposed categories of information that customers will receive from National Grid are aligned to the PARCA Phased Works and associated milestones

    • Is there any other additional information that customers might wish to see from National Grid?


    And finally…

    Do you have any further questions, comments?


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