Shrinkage Forum
Tuesday 8 March 2011, 31 Homer Road
2
Agenda
1.0 Introduction
2.0 Review of Minutes and Actions from previous meeting (08 March 2007)
3.0 Incentive Regimes – DN Presentation
4.0 Leakage Model – DN Presentation
5.0 Shrinkage Proposal Process – DN Presentation
6.0 Theft of Gas – Open Discussion
7.0 Any Other Business
8.0 Diary Planning
Agree agenda items and actions for next meeting
Incentive Regimes
4
Incentive Regimes - Shrinkage
Shrinkage Incentive - Special Condition E8
Target volume baselines by LDZ
Incentive – reduce shrinkage volumes
Performance ‘valued’ at day-ahead gas price
Incentive – procure gas cheaper than day-ahead price
No cap or collar
Performance has a direct impact on DN costs and leads
to a better distribution of costs under RbD
5
Incentive Regimes - Environment
Environmental Emissions Incentive – Special Condition
E9
Target volume baselines by LDZ
Incentive – reduce leakage volumes
Performance ‘valued’ at social cost of carbon
10% cap and collar regime
Performance has a direct impact on DN revenue
Leakage Model
7
Leakage Model
Methodology developed in the early 1990s
Currently a spreadsheet model
‘Controlled’ by Special Condition E9 in Gas Transporter Licences
Five main elements
LP Leakage
MP Leakage
AGI Leakage
AGI Venting
Interference Damage
8
Leakage Model E9 Obligations
The Leakage Model shall facilitate the achievement of the following objectives –
The accurate calculation and reporting of gas leakage
Being consistent with, and where reasonably practicable, identical to Leakage Models used by other DN Operators.
Report the actual leakage volume (LVt,i) together with any new information obtained by the licensee regarding leakage rates, including data derived from leakage tests.
Annually review the Leakage Model to ensure that it continues to achieve the objectives and
Consult with shippers and other interested parties to seek their views
Propose such modifications (if any) as are necessary for the purpose of better achieving the objectives.
9
Leakage Model E9 Modification Process
Propose revised baselines
Consult with the industry
Appoint an ‘Independent Expert’ to review and report on the proposal
Submit report on the consultation to Ofgem
Implement the modification if approved by Ofgem
10
Leakage Model Elements & Main Input Parameters
Leakage Proportions(National Grid only)
Interference 0%
AGI Venting
5%
AGI Leakage
7%MP Leakage
8%
LP Leakage
80%
LP Leakage
Pipe Asset
No. Services & Replacement
Average System Pressure
MEG Saturation
MP Leakage
Pipe Asset
AGI Leakage
Asset Numbers
AGI Venting
‘Fixed’
Interference
Number of incidents
Reportable incidents
11
Low Pressure Leakage Model
Approximately 80% of all leakage
Leakage rates for 11 diameter/material bands, based on a national survey
carried out in 2002/03
> 2000 low pressure networks nationally
Average System Pressure - determined via recorded source pressure
data and network analysis
MEG Saturation (where used) – determined from recorded data and
network analysis
Pipe asset lengths (replacement of metallic mains has greatest impact)
No. of services
12
Medium Pressure Leakage Model
Approximately 8% of all leakage
Calculated at LDZ level
Pipe asset lengths
13
AGI Leakage Model
Approximately 7% of all leakage
Calculated at LDZ level
5 leakage rates for AGI asset types, based on a national survey
carried out in 2002/03:
Holders
NTS Offtakes
LTS Offtakes
District Governors
Service Governors
14
AGI Venting Model
Approximately 5% of all leakage
Fixed values based on a national value from the
2002/03 AGI leakage test report apportioned by relative
number of ‘venting’ AGI asset at time of Network Sales
15
Interference Damage Model
Approximately <0.5% of all leakage
Based on:
>500kg release incidents
Actual release value where recorded/estimated
Number other recorded incidents
Split by LP/MP (95/5)
Split by Puncture/Fracture (50/50)
Assumed leakage rates and response/fix times
Shrinkage Proposal Process
17
Shrinkage Proposal Process
1 Jan, 20112011/12 Initial
Proposal1 Mar, 2011
2011/12 FinalProposal
31 Jul, 20122011/12 Shrinkage
Assessment(Financial
Adjustmentto RbD)
1 Apr, 2011 - 31 Mar, 20122011/12 Shrinkage Period
(Estimated shrinkage procured on a flat daily basis)
1 Jan, 2011 -15 Feb, 2011
ReviewPeriod
1 Mar, 2011 -15 Mar, 2011
Users may seekOfgem Disallowance
1 Jan, 2011 -1 Apr, 2011
Proposal Period
31 Mar, 2012 -31 Jul, 2012
2011/12 LeakageAssessment
Leakage based on anticipated mainsreplacement, average system pressureand MEG performance
OUG & ToG based on forecast demand
Leakage based on actual mainsasset, average system pressureand MEG performance
OUG & ToG based on actualdemand
Theft of Gas
Open Discussion