1. Possible Alternative to use of SND in Demand Estimation
Review Group 176
Possible Alternative to use of SND in Demand Estimation

2. Use of SND in the Formula
Demandt = AQ/365 x ALPt x (1 + (DAF x WCF) ) x SF
WCF (Weather Correction Factor – at LDZ level)
= (Actual LDZ NDM Demand – Seasonal Normal NDM Demandt)
Seasonal Normal NDM Demandt
DAF (Daily Adjustment Factor – at EUC level)
= WSENSt/SNDt (for EUC)
WSENSt/SNDt (for LDZ)

3. Suggested approach - WCF
Use WCF = (Actual LDZ NDM Demand – Σ(AQEUC/365 x ALPt)LDZ)
Σ(AQEUC/365 x ALPt)LDZ
i.e. Derive an approximation of Seasonal Normal Demand for the LDZ by applying the ALP for the day to total AQ/365 for each EUC
Options for frequency of calculation:
Annual off-line calculation in September for new Gas Year
Infrequent,
easy
Frequent,
complex
Monthly off-line calculation throughout Gas Year, reflect evolution of AQs
Daily calculation, part of on-line Demand Attribution

4. Suggested approach - DAF
DAF currently published in August for next Gas Year
DAF less sensitive to SND than WCF
Use DAF = WSENSt/ AQEUC/365 x ALPt
WSENSt/ Σ(AQEUC/365 x ALPt)LDZ
Options for frequency of calculation:
During Spring analysis using prior year AQs
In September when AQ amendment window closes
Monthly to reflect evolution of AQs
Daily calculation – not necessary/desirable?
Suggest calculation in advance in Spring – greater accuracy not required

5. Use of AQ and ALP – Summary
Advantages
Removes reliance on DN Forecasts
AQs already visible to Shippers – more “neutral”
No UKLink impact for annual/ monthly calculation
Should reduce WCF values if SND is generally overstated
Would complement a rolling AQ regime
Disadvantages
AQs based on historic data – out-of-date?
Can’t reflect current trends
Impact on UKLink for daily calculations
Annual/monthly calculations may not evolve quickly in line with actual AQs