National Grid Plc · LSE:NG.
National Grid — Investor Presentation (December 2002)
24 slides from National Grid's investor presentation, Dec 5, 2002
Slide 1: Reflections on Transmission Access: Strawmen following discussions with Ofgem
Reflections on Transmission Access Strawmen following discussions with Ofgem TCMF 5 December 2002
Slide 2: Introduction
Introduction Discussions with Ofgem following publication of SO Incentives consultation document in October Reflection on industry access debates following these discussions Understand Ofgem will set out their views on access in the forthcoming proposals document Provide information to Users
Slide 3: Overview of requirements (1)
Overview of requirements (1) Creation of long term financially firm tradable entry and exit rights Initial Allocation of rights (until the end of the next TO Price Control period) on the basis of prices related to costs (possible use of ICRP as a starting point) Capacity buyback incentive to c
Slide 4: Overview of Requirements (2)
Overview of Requirements (2) A mechanism to provide NGC with signals from Users as to need for incremental capacity release (from both initial allocations and from secondary market trading) New NGC Incremental Capacity Release statement would indicate methodology for determining whether to relea
Slide 5: Product
Product Product would be either the right or the obligation to inject into or offtake from the transmission system up to a specified capacity in a particular zone i.e. entry and exit access rights Right if access charge positive, Obligation if access charge negative Zones ideally use the 1
Slide 6: Entities buying rights/obligations
Entities buying rights/obligations Entry All licenced generators Traders? Interconnectors? Exit Suppliers Traders? Interconnectors? Players may differ for initial allocation and longer term allocations
Slide 7: Initial allocation
Initial allocation Release of baseline capacity only Prices set to recover TO allowed revenues Participants would only have to specify the rights that they wished to acquire for each quarter until the end of the TO Price Control
Slide 8: Consequent long term allocation process (1)
Consequent long term allocation process (1) NGC would be obliged to make available baseline and any obligated incremental capacity (as determined by an ICR statement) A possible mechanism would be to publish a set of prices and volumes for capacity in each zone e.g. price/volume for baseline cap
Slide 9: Consequent long term allocation process (2)
Consequent long term allocation process (2) Allocation would be performed for each zone and for each quarter for the number of years offered Users would reveal volumes they are willing to buy at the different prices (tranches) in each quarter
Slide 10: Long term allocation - illustration
Long term allocation - illustration Baseline + first & second increment 14 Price (P3) set to include incremental investment costs Capacity 12 available10 8 6 4 2 0 Y1 Y2 P3 Y3 Y4 P2 Price Baseline Y5 Y6 Y7 Y8 P1 Baseline + first increment Year Y9 Y10 Price (P1) set to Price (P2) set to include recov
Slide 11: Example of allocation
Example of allocation Available Tranche Volume Allocation Capacity Price Tendered Baseline 10 5 13 Baseline + 1st increment 12 5 13 Baseline + 2nd increment 14 6 11 Baseline + 3rd increment 16 7 9 In this example, 11 units would be allocated at a price of 6 if incremental capacity is released If
Slide 12: Deciding the allocations
Deciding the allocations Where incremental capacity is made available, this indicates that there is likely to be a constraint if only baseline capacity released the allocations and prices will be made on the basis of the first tranche for which the volume tendered is less than the total volume s
Slide 13: Deciding on incremental capacity
Deciding on incremental capacity NGC could apply for incremental capacity to be included in capacity release incentive at any time on account of prices revealed via secondary trading during course of the allocation, on the basis of the tenders that it had received If its inclusion was not ve
Slide 14: Long Term Allocations
Long Term Allocations Combination of long term (>= 1yr) and short (< 1yr) term allocations short term allocations to re-offer unsold capacity and release any additional capacity that has become available Precise length of subsequent long term allocation would need to be determined timing of
Slide 15: Granularity of rights/obligations
Granularity of rights/obligations Initial allocations NGC would sell quarterly blocks of access rights Secondary trading Participants could divide quarterly blocks into whatever products they wanted to trade Monitoring & settlement in an ideal world would be half-hourly – system and tran
Slide 16: Overall pricing structure (1)
Overall pricing structure (1) Access charges would be defined for the allocation process zonal differences (based on ICRP or other methodology) capacity (MW) charge “Residual transportation charge” covers those TO allowed revenues not emerging from allocations of baseline capacity ener
Slide 17: Overall pricing structure (2)
Overall pricing structure (2) BSUoS charges would remain but would exclude buyback and associated incentive costs Connection Charges Would still be required Envisage a “shallower” regime
Slide 18: Access charges
Access charges Charges for each quarter in a year could be the same or different Different zones would have different charges Charges could be positive or negative
Slide 19: Rights and obligations
Rights and obligations Rights Users would pay for rights entitlement to used energised capacity but no obligation to do so subject to over-run charges if exceed rights Obligations Users would be paid for obligations obligation to make available energised capacity at specified times – t
Slide 20: Trading access rights
Trading access rights Central registration of each holder’s access rights required Intra-zone trading no restrictions Inter-zone trading potential for exchange rates Rights can be traded down to whatever settlement level is decided upon key issue is how to deal with customers’ changing
Slide 21: Resolving constraints
Resolving constraints Recognised that zonal product provides a compromise between constraint cost and investment cost capture Envisage NGC will have tools outside of the access market to resolve any residual issues Nodal contracts BM Bids/Offers May require change to Security Standard to b
Slide 22: Monitoring and settlement
Monitoring and settlement Anti-hoarding measures might require users to nominate the volume of rights they are going to use at the day-ahead stage NGC could then be obliged to sell any rights that users had bought but were not going to use, with revenues from sales going to initial holders Thi
Slide 23: Summary
Summary Discussions with Ofgem have informed us as to what their more detailed requirements for an access regime might be Our understanding is that it is closer to NGC’s “Strawman B: Full Scale Access model” though anticipating some simplifications Different to the focus TASG has had looking a
Slide 24: Next Steps
Next Steps Ofgem initial proposals document likely to contain views on transmission access Presentation to TASG meeting tomorrow A need to re-assess the issues and workings of a more radical change to the access arrangements
National Grid — Investor Presentation (December 2002) on 6ix