Review Group 264
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Review Group 264 Rules & Options Analysis for BSSOQ Methodology Changes Post MOD244 16 th September 2009. Rule & Options Analysis - Background. xoserve tasked with investigating : Scenarios specifically concerning reducing booked capacity and enabling DM SOQ to be reflective of this reduction

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Rule options analysis background

Review Group 264Rules & Options Analysis for BSSOQ Methodology Changes Post MOD24416th September 2009


Rule options analysis background

Rule & Options Analysis - Background

  • xoserve tasked with investigating:

    • Scenarios specifically concerning reducing booked capacity and enabling DM SOQ to be reflective of this reduction

    • As the DM SOQ is limited by not being less than the BSSOQ:

      • Investigate current rules and possible options for changing the derivation and timescales applied to the BSSOQ regime

      • Enable the DM BSSOQ and subsequent DM SOQ to be more reflective of current capacity requirements

      • Possibility to reduce DM SOQ more easily / frequently


Rule options analysis context

Rule & Options Analysis - Context

  • BSSOQ rules and processes are defined in UNC and UK Link

  • Changes to BSSOQ regime may require changes to UNC and systems

    • Timescales and changes therefore are considered to be longer term rather than short term (post winter 2010)

    • As a result, transitional relief options (options with ability to implement in short term) are available but limited

  • Defining Rules & Options analysis is still ongoing

    • Details presented give an indication of options being investigated and indicative details

    • Next stages re: progress to be determined


Rule options analysis current bssoq process

Rule & Options Analysis - Current BSSOQ Process

  • BSSOQ reviewed during June each year

  • Represents peak day consumption for the previous winter (Oct – May)

  • New BSSOQ value applied 1st October

  • DM SOQ can be reduced during capacity reduction period (CRP: Oct – Jan)

  • DM SOQ cannot be confirmed lower than the BSSOQ

    • During the BSSOQ Review, INT sites can have an increased BSSOQ

  • Revision of the BSSOQ can take up to 2 years, therefore limiting the ability to reduce the DM SOQ


Rule options analysis considerations

Rule & Options Analysis – Considerations

Analysis has considered the following:

  • Changes to BSSOQ regime should not introduce greater volatility in BSSOQ or DMSOQ where demand is stable

    • i.e. BSSOQ should reflect consumptions that contain all winter months to identify the peak

  • Reasonable constraints and incentives against unreasonable capacity profiling should be maintained

    • i.e. restrict ability to increase and decrease DM SOQ at any time

  • Provide a reflective SOQ and SHQ to DN’s that is fit for purpose (supply security / system planning)

  • Where BSSOQ timings have been changed CRP timings would also need to be changed to allow benefit to be realised


Rule options analysis option a

Rule & Options Analysis – Option A

  • Change timing of annual BSSOQ Review and CRP

    • Shorten BSSOQ period to run from Oct 1st to Mar 31st

    • CRP changed to Apr 1st to Nov 1st (extended from 4 to 8 months)

      • Shortens ‘Winter’ period (removes April and May: estimate 35 sites impacted)

        • Allows quicker review and change of BSSOQ post winter period

        • Aligns charge rate impact of BSSOQ with other charge rate changes

    • Discontinue manual review of BSSOQ calculation (minimal impact) and update revised BSSOQ effective from April 1st

    • BSSOQ unchanged until next April (subject to appeals / ratchets)

    • Permit BSSOQ appeals based on more accurate historic data


Rule options analysis option a cont

Rule & Options Analysis – Option A Cont.

  • Where demand is changing:

    • The Shipper could reduce their DMSOQ in April to new BSSOQ giving earlier reduction in charges / revenue by 6 months

    • FIRM – profiling as now, the Shipper could reduce DMSOQ in April and increase in October to accommodate ratchet incentives applying

    • INT – as no ratchet applies, behaviour will be similar to now (maintain April DMSOQ throughout)

  • Option would shift when Shippers will reduce their DMSOQ (from Oct to Apr) but should not alter the limited ability to profile DMSOQ

  • Costs / Timescales: £57k to £80k

  • Feasible for April 2011


Rule options analysis option b

Rule & Options Analysis – Option B

  • Two BSSOQ Updates per year using shorter BSSOQ period

    • 1: Oct – Update BSSOQ based on UWP from Jan to May

    • 2: Apr – Update BSSOQ based on UWP from Oct to Feb

    • CRP would start in April, end in mid-winter

  • Where demand is changing:

    • Shipper could reduce DMSOQ in Apr and Oct to new BSSOQ giving earlier reduction in charges / revenue by 6 months and every 6 months

    • BUT – could introduce additional within year fluctuations in BSSOQ as both reviews do not consider full winter period (misses some winter months)

  • Costs / Timescales: £70k to £100k

  • Not considered to be feasible due to missing winter period


Rule options analysis option c

Rule & Options Analysis – Option C

  • Two BSSOQ Updates per year using a full set of winter consumption periods

    • 1. Oct – BSSOQ based on UWP from Oct previous year to May current year

    • 2. Apr – BSSOQ based on UWP from Mar previous year to Feb current year

    • CRP would start in April, end in mid-winter

    • UWP based on periods that contain all winter months

  • Where demand is changing:

    • Shipper could reduce DMSOQ in Apr and Oct to new BSSOQ giving earlier reduction in charges / revenue by 6 months and every 6 months

    • Could introduce additional within year fluctuations in BSSOQ but only where actual peak demand is changing

  • Costs / Timescales: £70k to £100k (as per Option B)

  • Feasible for April 2011


Rule options analysis option d

Rule & Options Analysis – Option D

  • Rolling BSSOQ Review

    • Each month update BSSOQ based on peak consumption from the most recent period that contains all winter months (in last 12 months)

    • CRP would continue all year (to enable benefit of BSSOQ change)

  • Where demand is changing:

    • The BSSOQ would be reflective of most recent peak demand

    • Could introduce fluctuations in BSSOQ and DM SOQ throughout the year

    • Profiling could occur but would have to be undertaken within the month.

  • Costs / Timescales; As Option C (£70k to £100k), anticipated to be more expensive due to additional system changes & risks due to update frequency

  • Possible long term Option


Rule options analysis radical options

Rule & Options Analysis – Radical Options

  • Radical Options - with more significant issues requiring investigation:

  • 1. Re-define BSSOQ as average winter day consumption of previous gas year

  • 2. Re-define the BSSOQ as AQ / 365

    • Option 1 & 2 allow greater reduction / flexibility in SOQ due to a lower BSSOQ

  • 3. Discontinue or redefine the BSSOQ before MOD90 is implemented

    • Is BSSOQ value required?

    • Appropriate mechanisms need to be in place to maintain integrity of DMSOQ


Possible analysis transitional relief option

Possible Analysis – Transitional Relief – Option

  • Transitional / short term relief options are limited and would require investigation of feasibility, costs and appropriateness

    • Preferred option has been stated here

    • Require minimal system change & utilise current processes

  • Retrospective Rebate – where demand has been significantly below the prevailing BSSOQ for at least 12 consecutive months, issue a rebate

    • Based on difference between BSSOQ and peak daily consumption from 12 month period

    • And where Shipper has also retrospectively reduced their DMSOQ to the BSSOQ in last 12 months

    • Validate changes to monitor inappropriate behaviour


Rule options analysis next steps

Rule & Options Analysis – Next Steps

  • Additional areas to be considered?

    • Limited transitional / short term relief options available – progress?

    • Issue with feasibility and appropriateness of long term options – progress?


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