1. Proposed Environmental Incentive

2. Background
In its recent SO Incentives Final Proposals, Ofgem stated that it planned to introduce a ‘methane incentive’
Ofgem has asked National Grid to come forward with proposals for an NTS environmental incentive (relating to methane venting) to apply from 1 April 2008

3. Proposals Process
National Grid are launching an industry consultation on initial proposals on 2 May and requesting responses by 30 May
Ofgem will then use these responses to inform its Final Proposals

4. Proposed Incentive
National Grid exposure to the environmental costs, through an adjusted shadow price of carbon, of venting methane during depressurisation of NTS Compressors.
This will ensure that the total costs are factored into National Grid’s decision process on whether to depressurise a compressor or whether to incur the ongoing costs of holding a unit pressurised
If National Grid can reduce vented volume it would gain under the incentive, if volumes increase then it would lose

5. Publication of proposals
Initial Proposals document will be available on National Grid’s website by 2nd May
Register for the SO incentive circulation list
We will be asking the Joint Office to circulate a link to the Initial Proposals document

6. Review of SO Incentives from 09/10

7. Development of SO Incentives
Building on the SO incentives process introduced last year, Ofgem has asked National Grid to lead this process from the beginning
Following feedback, this year National Grid will be looking to engage earlier with the industry
Further information on the plan for this year will be brought to the June workstream meeting