1. Options for the Development of a Demand Side Response Mechanism
15 May 2014

2. Significant Code Review (SCR) Security of Supply (SoS) Background
Aim of the Gas SoS SCR:
to reduce the likelihood, severity and duration of an emergency;
ensure that market arrangements provide sufficient incentives on shippers to maintain SoS
ensure that in an emergency Market Rules appropriately incentivise shippers to balance supply and demand.
Develop appropriate payment arrangements for
voluntary and involuntary DSR

3. Background A Draft Licence Obligation on NGG
Ofgem’s SCR SoS Review – Final Policy Decision issued 12 February 2014
Included as part of consultation:
A Draft Licence Obligation on NGG
to develop a DSR Methodology
in consultation with the industry.
(Statutory Licence Consultation Summer 2015)

4. Proposed DSR Licence Obligation
Draft Licence Condition on NGG to;
Develop a draft DSR Methodology, in consultation with stakeholders; and
Submit the DSR Methodology, to the Authority, by March 2015
Where directed by the Authority run a trial (paper based) of the DSR Methodology; and
Report back to the Authority on the outcome of the trial; and
Subject to the trial, implement the revised arrangements by winter 2016/17.

5. DSR Methodology and Mechanism Timescales
2014
2015
2016 ?
Summer 2014
Stat consultation on
Licence changes
12/02/2014
09/04/2014
01/03/2015
01/10/2016 ? ? ? ?
May 2014 – Jan 2015 ?
May – Jul
Sep - Dec
Feb - Sep
Industry Development
of a draft DSR Methodology &
DSR Mechanism
Run Trial
(subject to
Authority
Direction)
Final
Modification
and consult
System
Design,
Build,
Test
&
Implementation
Consultation closes
SC8I draft published
Implement methodology
& mechanism
Submit a draft Methodology to Ofgem
Submit report on trial to Ofgem
Ofgem decision

6. Customer Engagement
Throughout April and May NGG holding DSR Development 121s with industry parties to understand needs, opinion and concerns/ideas of End Customers and Shippers/Suppliers.
The SoS SCR Final Policy Decision consultation also provided industry with the opportunity to record initial views and recommendations regarding DSR licence obligations
Outcome of 121s and consultation responses may provide initial building blocks for DSR Methodology draft strawman options
Continued development of DSR Methodology would now benefit from a more centralised collaborative industry engagement.

7. Proposed way forward Development of the DSR Methodology will require:
UNC revisions to enable the DSR offers to be accepted under specified arrangements, which differ from existing Market Balancing Actions arrangements
Requirement for Industry engagement to develop DSR Methodology, in particular Shippers, Suppliers, large Industrial End Consumers and the DNOs
Development area focused on Market and Energy Balancing arrangements
Industry engagement should be undertaken with the most efficient use of industry parties time and resources in mind.
We propose that the changes are best placed being developed through the governance of the Modification Rules using Transmission Workgroup attendees as experts in this area.

8. Proposed options for development route
Option 1: Raised as an ‘Issue’ at the next Transmission Workgroup
- Raised 5th June Transmission Workgroup
- Further meetings scheduled by Workgroup
Option 2: Raised as a high-level Modification Proposal with a recommendation that it goes to Transmission Workgroup for development.
- Submit Modification Proposal to 19th June Panel
- Send to 3rd July Transmission Workgroup
Alternatively raise DSR as an A.O.B. item at the June Transmission Workgroup
and submit Draft Proposal for development to June Panel

9. DSR proposed plan and timescales

10. DSR mechanism three way party interaction
End User
Offers to
reduce
gas offtake
Shipper
Offers
Volume
on the
OCM
(to NGG only)
NGG
Accept Offers
for
volume
certainty of volume
&
level of cashout
exposure
certainty of volume
for operational
purposes
cost and risk
mitigation