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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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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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