Entry Capacity Substitution Paul O’Donovan Gas Transmission Policy 7 June 2007

Outline What is capacity substitution? Policy objectives Current status Points to note

What is capacity substitution? Mechanism which allows unsold capacity to be exchanged for capacity at entry point(s) which is/are signalling a requirement for incremental capacity investment Represents a permanent shift of capacity from the donor(s) to the recipient(s), with donor ASEP capacity adjusted appropriately

Policy objectives Maximise use of existing Transmission network assets for the benefit of consumers Intention is to avoid both capacity sterilisation and unnecessary infrastructure investment while accommodating changing flow patterns NGG to make informed judgement on how unsold capacity can be put to use in other areas of the network that are signalling investment requirements Will be enforced through a new licence condition

Current status Methodology statement being consulted on – finishes 15 June Ofgem has two months within which to veto Would be longer if an Impact Assessment was deemed to be necessary Approval by mid-July would allow for implementation after September 07 QSEC

Points to note Targeted at avoiding unnecessary investment Potential impact on LTSEC strategies Trade & transfer