UNC Modification 0213 – User Pays Governance Arrangements

Simon Trivella – 19th June 2008

Governance Workstream

Considerations

• Change Strategy

– What does industry want to achieve, target issues, predict changes

• Change Definition

– What are the objectives, drivers and requirements (avoid early solution focus)

• Change Effectiveness

– Is there industry support and what can be done to improve it

• Change Priority

– How do we prioritise change evaluation and delivery

• Change Parties and Providers

– Are all parties / providers party to the governance process

What is a User Pays Modification Proposal

• Questions..

– Does the Proposal involve changes to GT systems

– Does the Proposal result in an additional (or change to) GT service or process

– Who are beneficiaries of the Proposal

• GTs

• Users

• Others

• Mixture

– Are the GTs funded for implementation and operation of the change

Transporter and User Allocations

• Potential for no agreement on ‘beneficiaries’

• Simple process required

• 5 basic possible allocations (Users : GTs)

– 100% : 0% (User benefit only)

– 75% : 25% (User benefit > GT benefit)

– 50% : 50% (approx equal benefit)

– 25% : 75% (GT benefit > User benefit)

– 0% : 100% (GT benefit only)

• Option for Alternative Proposals if no agreement reached

Transporter Cost Allocation Methodology

• Governance for GT cost allocation (funding and liabilities)

– Joint Governance Arrangements Agreement (A12)

– Agency Service Agreement (A15)

• 5 GT Cost Allocation ‘Pots’ used for Agency costs

• UKT : DNs

– 100% : 0%

– 20% : 80%

– 11% : 89%

– 0% : 100%

– Ad-hoc Individual GT’s Requirement

• e.g. Changes to SIUs arrangements would be 100% SGN

User Allocation ‘Pots’

• Similar process to GT Allocation to avoid ‘Class 3 Mod Syndrome’

– Small Supply Point count?

– Large Supply Point Count?

– AQ Proportions?

– DM Portfolio?

– Existing service / process usage?

– Adhoc?

• Users to have appropriate governance arrangements to reach agreement

– Not a GT issue although would be specified on a GT Proposal

– Utilisation of existing group, Gas Forum?

• Option for Alternative Proposals

Cost & Implementation Timescale Analysis

• Panel decision on requirement for analysis pre DMR stage

• Early view from GTs on Proposal

– Are Requirements, Assumptions & Business Rules clearly defined

– What additional clarification is required

• Lead Representative (similar to SME) required to provide

– What level of analysis can be provided

• Analysis, Investment and Transaction costs

• Tolerances

• Timescales (Initial Analysis, Full & Firm Analysis and Implementation timescales)

• Panel decision on delivery timescales

– Ability to extend as necessary (change in scope, prioritisation etc.)

Cost & Implementation Timescale Analysis

• GT to cover cost of analysis if required pre DMR stage

– UNC Panel decision

• Adequate governance and protection

• Reflects industry views

– No additional funding mechanisms required (i.e. Joint Office)

– Business as usual approach

Cost & Implementation Timescale Analysis

• Full & Firm analysis may be required for Consultation (DMR Stage)

– Similar process to pre DMR stage

• UNC Panel decision

• Additional clarity maybe required

– F&F costs recoverable if significant

• GTs to identify prior to analysis

– If implemented:

• cost recovery based on ‘beneficiary’ proportions (User Pays Code Service)

• Defined period for collection

– If not implemented:

• cost recovery based on ‘standard’ allocation basis (User Pays Code Service)

• Defined period for collection

Investment and Transactional Costs

• Investment Costs

– Payable by defined Beneficiaries

• Ensures cost recovery

• All parties treated equally

• Early / late usage not discriminated against negatively or positively

– Recoverable as User Pays Code Service over defined period of time

• Transactional Costs

– Governed by ACS process (as is)

Next Steps

• Continue development of business rules

– Gain industry agreement and support (where possible)

• Ensure solution is fit for purpose

– Comparisons from electricity (cost provision)

– Would the proposal work for previous Modifications?

• Additional issues to consider

– Third Party Modifications

• Special arrangements required?

– Urgent Modifications

• Can these be User Pays and if so how are they accomodated?

• ACS and Alternative Proposals

– Will we be swamped, Is there a better way?

UNC Modification 0213 – User Pays Governance Arrangements

Simon Trivella – 19th June 2008

Governance Workstream