1. Transmission Workstream, 2nd March 06
Initial thoughts on methods to optimise capacity availability between ASEPs
Transmission Workstream, 2nd March 06

2. Content AMSEC auction results
Options to optimisation capacity availability
Key development areas

3. AMSEC auction results (Winter 2007)
BA = Bacton, EA = Easington, HS = Hornsea, SF = St Fergus,
TE = Teesside, WF = Wytch Farm

4. Optimisation of Capacity between ASEPs
AMSEC auction results show
Several ASEPs sold out for some periods, often with bids far in excess of available capacity
Limited ability to complete investments to seek to satisfy user requirements within constrained period
Other ASEPs with unsold capacity
Are there methods by which unsold capacity at an ASEP could be “transferred” to other ASEPs to allow optimisation of available capacity?

5. Optimisation methods
Assuming baselines remain fixed, two potential ways in which capacity may be optimised:
Option 1 - Transfer of Unsold Capacity between interacting ASEPs
Option 2 - Transfer of Sold Capacity between interacting ASEPs – “Market Maker”

6. Option 1. Transfer of unsold capacity - Principles
Provide shippers at an ASEP with ability to obtain unsold capacity at other interacting ASEPs
Amount of transfer dependant on “exchange rate” between ASEPs
results in areas of possible transfer e.g. Easington, Hornsea, Aldborough, Theddlethorpe, Bacton, Teesside
Unsold capacity for year ahead after AMSEC auction aggregated into one “pot”
Allocate aggregate unsold capacity to interacting ASEPs based on
unsatisfied bids in AMSEC auction; or
bids placed in new auction held after AMSEC and before RMSEC

7. Option 1. Transfer of unsold capacity - PrinciplesB C D E F
Aggregate
Unsold
Capacity
Unsold
Capacity
Allocated based on price
and volume of bids subject to
exchange rates

8. Option 2. Transfer of sold capacity - Principles
After AMSEC auction, issue buy back tender to all ASEPs
include [2] months period for acceptance by National Grid
If any offers, then undertake additional AMSEC type auction
Release non-obligated capacity (within [2] months of receipt of offers) where value of bids exceed cost of required buy back offers, subject to exchange rates

9. Option 2. Transfer of sold capacity - PrinciplesB C D E F
Aggregate
Sold
Capacity
Allocated based on price
and volume of bids subject to
exchange rates
Sold Capacity – Buy back offer

10. Possible Annual Timetable
Issue buy back tenders for next gas year
Publish allocations
Based on principles of option 1 and/or option 2
Feb
Mar
April
May
Oct
Sept
AMSEC Auction
Rerun AMSEC Auction for next gas year only
Capacity transfers effective
Alternative timetables possible under option 1 :
allocate unsatisfied bids in AMSEC auction for following capacity year using aggregate pot of unsold capacity
If methods implemented this year, timetable would be on transitional basis

11. Key Development Areas Exchange rate methodology Allocation methodology
If capacity transfers do not result in required changes in gas supplies, then additional buy back costs could be incurred
Deal with through buy-back incentive or factor into exchange rate?
Allocation methodology
Dependant on exchange rate methodology
Treatment of costs and revenues
Recovery of TO revenue
Any resulting buy-back costs
Licence obligations
Obligation to offer capacity in at least one clearing allocation auction
……discuss at next Transmission Workstream