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Purpose of Presentation
Review of User Pays
Principles
Application to date
National Grid NTS observations for discussion
Views on next steps
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User Pays - the story so far
NTS PCR GDPCR ACS Mod 0213
The concept of “User Pays” applies solely to those services provided by xoserve (i.e. UK Link systems incl. Gemini), the Transporters Agent
Concept was first discussed in October 2006
User Pays principles developed over a number of years and its application is based on a number of key developments
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NTS Price Control Review – Costs of ongoing Industry Framework Changes
Transmission Price Control Review (TPCR) process
Ofgem set NGG Transmission’s price control allowance for xoserve funding for 2007/08 only.
GDPCR
Ofgem set funding from 1 April 2008 until 31 Mar 2012 and divided costs in to two categories.
Ofgem suggested future Gemini system development costs should be paid for by parties that value the change the greatest (8.14 GDPCR)
Exit Reform and Entry Capacity Arrangements
Fixed allowance provided
Future developments
Funded by those who value it most
xoserve Funding
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Gas Distribution Price Control Review (GDPCR)
User Pays Implementation Group (UPIG) set up in Sept 2007.
Examined how to implement the Ofgem GDPCR proposals to introduce "User Pays" arrangements for defined services (not future change)
The User Pays arrangements proposed that xoserve's services be split between:
“Core” / PCR proposed services, to be funded through the Transporters’ price control, and
"user pays" services which would be funded by those users who most value them, shippers, transporters or both.
User pays services were further classified
“Code" services, those already detailed within the UNC - continue to be governed by the existing UNC arrangements
“Non-code" services - provided via a contract between xoserve and the customer and not detailed in the UNC.
Users are charged for the non-code services they use by xoserve
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Agency Charging Statement (ACS)
GDPCR introduced changes to SSC A15 (“Agency”) of the Transporters' licence
Obliges Transporters to produce and publish an Agency Charging Statement (ACS)
ACS
Contains the scope of core and user pays services, the charging methodology for user pays services and the charges themselves
Proposed changes to the ACS must be sent to Ofgem for a minimum period of 28 days in accordance with A15
Charges ‘as far as reasonably practicable, reflect the costs of providing the service’ charges can include xoserve margin (6%)
Mod 0188 introduced concept of ACS into UNC
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UNC Modification Proposal 0213V: “Introduction of User Pays Governance Arrangements into the UNC”
EDF Energy raised UNC Modification Proposal 0213V as a means of revising the UNC
Mod Process, so that a Mod must state if it contains a User Pays element
All proposals to say whether User Pays or not if Users Pay it should state:
Who should fund the xoserve costs, e.g. transporters or shippers, and in what proportion, e.g. transporters 50%, shippers 50%
How costs should be apportioned - transactional basis, or by market share, or per new report etc.
When a User Pays proposal is sent to Consultation
GTs should provide a high level cost estimate (ROM) with the draft Mod report
A more robust cost estimate can be requested by the Modification Panel
Assumption is that all User Pays modifications will have a ROM unless the Panel determine otherwise. (Business Rule 9 of 0213V)
User Pays costs should be included in the FMR and an accompanying revised ACS
A direction from the Authority to implement the Modification Proposal would also be deemed to be a non-veto of the ACS amendment.
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Detailed Cost Analysis (DCA)
Who can request a DCA?
Modification Panel
Gas & Electricity Markets Authority
Workstream
All DCA requests are required to be submitted to xoserve via a GT
Cost recovery
DCA are chargeable and would be defined in the ACS and recovered accordingly.
Non implemented proposals which have had DCA are also chargeable and would be defined in the ACS and recovered
accordingly
Therefore consideration should be given to the economic implications of requesting numerous DCAs
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Observations for discussion
Although user pays is still in its infancy, National Grid NTS suggests a discussion on the following;
Rough Order of Magnitudes (ROM) and Detailed Cost Analysis (DCA)
Production of the IS scoping document(s) Who, where, when, who pays?
Timing and timeframe
Impact of Modification Proposals with multiple Alternatives
Roles and Responsibilities
Modification Panel
UK Link Committee
Change to UNC Governance Rules?
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ROMs & DCAs: Timescales Implications
Timescales are potentially longer and the industry should be mindful of this when raising
Modification Proposals.
Steps may include;Workstream – development of business rulesROM requiredDCA requiredUK Link committee
Jan Feb Mar April May June July Aug Sept Oct Nov DecWorkstream ConsultationDCA FMR/vote Authority
ROM
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Roles and Responsibilities
How effective is the
Modification Panel in judging,
prior to consultation, that
Business Rules (BR) are
sufficiently detailed to enable
system development costs to
be accurately determined?
Does the Modification Panel
have this skills set?
Is the UK Link Committee
better placed to judge this/
Mod Panelreceive aproposal
recommendingit go to
consultation
UK Link committee
Yes IS detailsufficient
No BR detailinsufficient
Mod Panel Mod Panel
ConsultationWorkstream orReview Groupto work up BR
detail
UK linkcommittee
Mod Panel
No IS detailinsufficient
Yes BR detailsufficient
Consultation
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User Pays - Application to date
User Pays Principle Mod 0246 Mod 0224
Proposal a core service
funded through PCR?
No No
Proposal User Pays? Yes Yes
Proposal a Non-Code
Service (ASA)?
No No
Proposal a Code
Service (UNC)?
Yes Yes
Who should fund
proposal?
100% Shippers – rationale
provided (no benefit to GTs)
100% Shippers
How should costs be
apportioned?
All shippers with QSEC
capacity - based on their
proportion of the overall value
of capacity Y2-Y16 on
implementation
Development cost - all shippers, based on
eligible Meter Points.
Ongoing services – all participating meter
points pay a daily charge + transactional
charge for Cons. Adj.