PRIDe in Gas Model workshop

25 July 2018

Agenda

▪ Introductions

▪ Objectives of the day

▪ Problem statement

▪ Overview of the PRIDe in Gas Model

▪ Summary of approach

▪ Timelines

▪ Conclusions and next steps

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Objectives for the day

▪ Share information on the PRIDe in Gas Model

▪ Discuss and Define the use of each PRIDe technique

▪ Perform analysis on each PRIDe technique▪ What we like

▪ What we don’t like (what can be changed)

▪ Gain agreement on the overall use of the PRIDe in Gas Model

▪ Gain agreement on timelines for implementation

▪ Gain PAC commitment/prioritisation for next steps

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Problem statement

▪ Currently have limited tools to manage performance related risks in the market

▪ Current controls are not scalable to effectively resolve a wide range of risks▪ Significant risks

▪ Non significant risks

▪ Ability to escalate risks is not defined

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PRIDe in Gas Model

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PRIDe in Gas Model

▪ Complementary set of Preventive, Detective, Incentive and Remedial assurance techniques. Used flexibly to address Settlement risks

▪ The use of any techniques under this model is the decision and discretion of the PAC based on the information it receives through the PARR and the PAFA

▪ A risk that presents a significant impact to Settlement would necessitate the use of a stronger control

▪ Whereas a risk that presents a smaller impact to Settlement would necessitate the use of a weaker control

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Prevent

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▪ Used as a first course of action to consider when presented with a risk to Settlement

▪ Technique is always used for managing risks

▪ It contains the use of the PARR and production of performance reports on a monthly basis

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Prevent

PAFA

Mar

ket

Pa

rtic

ipa

nts

(S

hip

pers

an

d T

ran

spo

rte

rs)

PAC

CD

SP Start CDSP extracts data

PAFA produces and analyses PARR

reports

Are there any outliers?

Can further analysis be done

with current data?

Yes

NoRequest additional data from the CDSP for further analysis

Report on industry performance along

with any PAFA recommendations

No

Data sent to PAFACDSP extracts data

for further investigation

PAFA analyses additional data

Yes

Report on additional areas for analysis along with

any PAFA recommendations

PAC provide comments and

decision on recommendations

PAC provide comments and

decision on recommendations

PAC agree on timescale of next

steps

PAFA to use another technique to

manage industry issue

PAFA to educate Market Participants

on where performance is below industry

standards

PAFA to continue to monitor reports for both Shipper and

industry performance

PAFA investigates further into

performance issue

Market Participants receive report

Publish report to PAC and Industry

Publish report to PAC and Industry

Market Participant and PAFA arrange

an education workshop

Incentivise Technique

Detect Technique

Remedy Technique

Prevent

Control strength Control

Low Continue to monitor PARR reports as standing monitoring

Continue to monitor PARR reports for a fixed timescale before escalation decision

Provide education to the industry

Provide engagement to acknowledge performance

Medium Consider if further analysis is required on an adhoc basis

Consider if further analysis is required on a frequent basis

Determine if current risks are being mitigated

Determine if escalation for other techniques is required

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Detect

▪ Used to further investigate and audit areas of interest

▪ Drill down into data to find determine materiality of issues

▪ Determine root cause if not already known via data analysis or engagement with parties

▪ Monitoring of issue via ad-hoc developed anonymised reports

▪ Option for issues not captured in the PARR reports to be presented and discussed

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Detect

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Control strength Control

Low Use Prevent technique to continue monitoring for a fixed timescale before escalation decision

Use Prevent technique to continue monitoring standing monitoring

Medium Define and create adhoc reports as standing monitoring

Define requirements for CDSP data extract

Request data analysis from PAFA

Recommend further area of investigation

Determine if escalation for other techniques is required

Determine the conditions to appeal any escalation decision for incentive and remedy techniques

Determine if current risks are being mitigated

Determine if newly identified risks/issues are being mitigated

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Detect

PAFA

Mar

ket

Part

icip

ants

(S

hip

pe

rs a

nd

Tr

ansp

ort

ers)

PAC

CD

SP

Start

CDSP extracts data

PAFA analyses data

PAC discuss current industry issues and

areas of interest

Define areas to audit and

investigate

PAC decide what areas of the industry to

investigate and what data is

required

PAFA recommend areas to investigate based on industry performance and

industry issues

PAFA produces report with

recommendation on next steps

PAC provide comments and

decision on recommendations

PAC informs the industry of

investigation

Market Participants informed of investigation

PreventiveTechnique

Remedy Technique

Incentivise Technique

Incentivise

▪ Used for persistent performance issues and encouraging positive behaviours

▪ PAC receives non anonymised report data with names of all parties contributing to issues captured in PARR reports

▪ PAC receives non anonymised report data with names of all parties contributing to persisting issues not captured in PARR reports

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Incentivise

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Control strength Control

Medium Determine the conditions for entering and exiting liquidated damages

Determine the conditions for peer comparison reporting

Determine the conditions to appeal any decision for liquidated damages

Determine the conditions to appeal any decision for peer comparison reporting

High Determine if the significance of poor performance necessitates the use of liquidated damages

Determine if the significance of poor performance necessitates the use of peer comparison tables

Determine if performance is improving

Determine if current risks are being mitigated

Determine if escalation for other techniques is required

Incentivise

▪ Can you incentivise via name and shame?

▪ Does the lability represent the risk incurred?▪ How would this be quantified?

▪ Who pays who?▪ How would cash flow be managed and redistributed?

▪ What happens if a Party doesn’t pay?▪ Escalation actions?

▪ What if the fine is less than the cost of the benefit?▪ Fit for purpose?

▪ Mechanism for model adjustment?

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Incentivise

PAFA

Mar

ket

Part

icip

ants

(S

hip

pers

an

d Tr

ansp

ort

ers)

PA

CC

DSP Start

PAFA produces Anonymised and

UnAnonymised Peer comparison reports

Publish report to PAC and Industry respectively via

Huddle

Receive UnAnonymised

report for consideration

Receive Anonymised report

PAFA presents analyses of report

along with recommendations

for next steps

CDSP extracts data

Provide comments and decision on

PAFA recommendations

PAC agree on timescale of next

steps

Provide queries to the PAFA based on

findings

PAFA investigates and provides support and education

Market Participant and PAFA arrange

an education workshop

PAFA recommends uses liquidated

damages based on Market Participant

performance

Prevent Technique

PAC discuss and decide on using

liquidated damages for the agreed

period

PAC informs Market Participants on

liquidated damages to be received

Market Participant receives liquidated

damages

PAC decides if another technique needs to be used

Remedy Technique

Remedy

▪ Used as a last resort once other techniques have been exhausted

▪ Used to monitor party resolution plans based on PAC exit conditions

▪ PAFA to provide updates on resolution plan progress at agreed frequency to PAC

▪ PAC discussion on next steps based on lack of improvement

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Remedy

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Control strength Control

Medium Determine the conditions to appeal any decision for escalation to UNCC

Determine the conditions to appeal any decision for expulsion from UNC

High Define and create resolution plan to improve market participant performance

Request the PAFA to monitor resolution plan and provide updates

Determine if escalation to UNCC is required

Determine if recommendation for expulsion from UNC is required

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Remedy

PAFA

Mar

ket

Part

icip

ants

(S

hip

pers

an

d Tr

ansp

ort

ers)

PAC

CD

SP

Incentivise Technique

PAFA informs the Market Participant

of PAC decision

Market Participant proposes a

resolution plan for PAC approval and sends to the PAFA

PAFA reviews resolution plan and provides comments

and provides comments

PAFA reviews resolution plan

PAFA presents resolution plan to

the PAC

PAC monitors the Market Participant via PAFA reporting

until resolution

PAFA provides monthly updates to

the PAC

Detect Technique

Prevent Technique

PAFA arranges industry workgroup to assess industry performance issue

PAFA actions PAC s decision

PAFA produces a report of workgroup

conclusions and recommendations

PAC decides on next steps

Appeals process

▪ A Market Participant can appeal the PAC’s decision to activate a PRIDe technique if they believe:

▪ The due process has not been followed

▪ The use of evidence and circumstances has either been over or under emphasised

▪ The evidence used has been misinterpreted

▪ Appeal can be via email to the PAFA or PAC describing the query within 10 Working Days of a decision being made

▪ The appeal will be considered by the PAC at their next available meeting

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Summary approach

Planning

• Initial PRIDeworkshop

• PRIDe project plan agreed

Development

• Technique definition workshop

• Revision of PRIDemodel

• UNC impact assessment and implementation approach workshop

• Modification drafting workshop

Implementation

• Implementation date

• Trial run using industry data

Go live

• Go live

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July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun July

Timeline

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July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun July

Planning

Development

Implementation

Go Live

Initial workshop

Project plan agreed

Technique definition workshop

Revision of PRIDemodel

UNC impact assessment and implementation approach workshop

Modification drafting workshop

Modification raised

Implementation date

Trial run start

Trial run finish

Go Live

Indicative timeline

Timeline

Event Date

Initial PRIDe workshop 25 July 2018

Project plan agreed August/September 2018

PRIDe technique definition workshop w/c 17 September 2018

Revision of PRIDe model 9 October 2018

UNC impact assessment and implementation approach workshop w/c 15 October 2018

Modification drafting workshop w/c 22 October 2018z

Modification raised w/c 12 November 2018

Modification process w/c 12 November 2018 – 18 February 2019

Implementation date 4 March 2019

Trial run using industry data 4 March 2019 – 6 May 2019

Go live 6 May 2019

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Indicative timeline

Conclusions and next steps

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PAFA@Gemserv.com