Capacity Reservation Policy

Transcription

1 Capacity Reservation Policy Abstract This document summarises the current Bord Gáis Transportation ( BGT ) process for calculating Reserved Capacity ( RC ) and Supply Point Capacity ( SPC ) reservations. A number of potential enhancements are also proposed to cater for the opening of the Non Daily Metered ( NDM ) sector, the Section 2(1) Towns and to address issues arising from the current SPC reservations for distribution connected Daily Metered ( DM ) off-takes. Status Date Author Version Comment Final 03-Sep-2004 MFC 7d Clarification of SPC calculation using PMC method 03-Sep-04 Page 1 Decision Document

2 Contents 1. INTRODUCTION CAPACITY DEFINITIONS & OFF-TAKE CLASSIFICATIONS CURRENT POLICY TRANSMISSION LDM AND DM OFF-TAKES DISTRIBUTION LDM AND DM OFF-TAKES...4 SPC Reservation...4 RC Reservation NDM SECTOR...4 General...4 Calculation of the NDM SPC Reservation...5 Calculation of the NDM RC Reservation FUTURE POLICY PROPOSED ENHANCEMENTS NDM SECTOR AND THE FAR PROCESS...6 FAR Process...6 Phased Introduction of the FAR Capacity Setting Process NDM TRANSITIONAL ARRANGEMENTS FOR 1 ST JULY TO 30 TH SEPTEMBER SECTION 2(1) TOWNS FRANCHISE SPC RESERVATIONS FOR DISTRIBUTION CONNECTED DM OFF-TAKES...7 Short-tern Review...7 New DM Connections...8 Change of Classification...8 Longer-term Review ANNUAL REVIEW CYCLE CAPACITY RATCHETS INTERIM MARKET ARRANGEMENTS SUMMARY CONCLUSIONS CER APPROVAL...11 APPENDIX NO.1: FAR CAPACITY RESERVATION PROCESS CALCULATION OF THE PEAK-DAY DEMAND CAPACITY SETTING PROCESS...13 Existing I/C NDM Off-takes...13 Existing Residential NDM Off-takes...13 New NDM Off-takes...13 NDM SPC Annual Review Process...14 Proposed Changes to the FAR Business Model...14 Locked NDM Off-takes...14 Change Control Process...14 APPENDIX NO.2: DETAILED CALCULATION OF PMC Sep-04 Page 2 Decision Document

3 1. Introduction The current process used by Bord Gáis Transportation ( BGT ) to calculate transmission Reserved Capacity ( RC ) and distribution Supply Point Capacity ( SPC ) reservations is summarised in this paper. A number of proposed enhancements to the current process are also discussed, which will cater for ongoing developments in the Irish natural gas market, namely: The partial liberalisation of the Non Daily Metered ( NDM ) market on 1 st July 2004 and the associated requirement for transitional arrangements to cater for legacy Non-Third Party Access ( Non-TPA ) contractual arrangements; The award of the Section 2(1) Towns franchise on 1 st August 2004; and Modifications to the methodology used to calculate SPC reservations for distribution connected Daily Metered ( DM ) off-takes. It should be noted that the calculation of entry capacity and any associated back-up entry capacity is outside the scope of this paper. 2. Capacity Definitions & Off-take Classifications The following definitions of capacity and classification of off-takes are used in the remainder of this paper: Reserved Capacity ( RC ) is required by a shipper to off-take gas from the transmission system for either a transmission connected off-take or for onward delivery to a distribution connected off-take. Supply Point Capacity ( SPC ) is required by a shipper to off-take gas from the distribution system for a distribution connected off-take. A Large Daily Metered ( LDM ) off-take is defined as having an annual consumption greater than 57,500,000 kwh. A Daily Metered ( DM ) off-take is defined as having an annual consumption greater than 5,550,000 kwh and less than 57,500,000 kwh. A Non Daily Metered ( NDM ) off-take is defined as having an annual consumption less than 5,550,000 kwh. A shipper is required to make an RC reservation for transmission connected off-takes, and an RC plus SPC reservation for distribution connected off-takes. 3. Current Policy 3.1 Transmission LDM and DM Off-takes Shippers have the right to determine the appropriate RC reservation for each of their transmission connected LDM and DM off-takes under the current Code of Operations ( the Code ), provided that the RC reservation doesn t conflict with other contractual arrangements entered into with BGT e.g. the recovery of connection costs through the tariff. 03-Sep-04 Page 3 Decision Document

4 They have an incentive to make an appropriate RC reservation, however, if they are to avoid penal over-run charges. 3.2 Distribution LDM and DM Off-takes SPC Reservation BGT is required to calculate an appropriate SPC reservation for each distribution connected LDM and DM off-take. The following methodology was used to calculate the current SPC reservations: If there was sufficient historical DM consumption data available covering the previous winter period, then the SPC reservation was equal to the Peak Daily Read ( PDR ) i.e. the historical peak-day consumption; and If there was insufficient historical DM consumption data available then the SPC reservation was equal to the Peak Month Calculation ( PMC ), where: PMC = PMDA 1.2 Where: PMDA = Peak Month Daily Average The PMDA is calculated by dividing the total consumption for the peak-month by the deemed number of working days for the off-take. Each LDM and DM off-take has been categorised as having either a 7-day, 6-day or 5-day consumption pattern, and this is used to calculate the deemed number of work-days in each month for that off-take. The use of the above PMC formula was intended as a short-term measure to overcome the lack of historical DM consumption data when setting the SPC reservations for the current 2003/04 gas year. The CER has since commented on the appropriateness of the 1.2 multiplier. This and other issues will be discussed in Section No.4. RC Reservation Shippers have the right to determine the appropriate RC reservation for each of their distribution connected LDM and DM off-takes, provided that the RC reservation doesn t conflict with other contractual arrangements entered into with BGT e.g. the recovery of connection costs through the tariff. The RC reservation does not have to match the corresponding SPC reservation. Again Shippers have an incentive to make an appropriate RC reservation in order to avoid penal over-run charges. 3.3 NDM Sector General The NDM sector differs from the LDM and DM sectors in a number of important aspects. It is much more temperature sensitive than the LDM and DM sectors, and there is obviously no DM metering available at individual NDM off-takes. 03-Sep-04 Page 4 Decision Document

5 The temperature sensitive nature of the NDM sector means that its future peak-day demand and, therefore, capacity requirement will be dependent on the severity of the following winter, which is obviously difficult to predict. In order to overcome this problem it is standard practice to use a normalised weather scenario as the basis for estimating the future peak-day demand of a temperature sensitive load. BGT use a 1 in 50 security standard, which is based on weather conditions so severe that statistically they are only likely to occur once every 50 years. The current approach, therefore, is to calculate a single aggregate SPC reservation for the entire NDM sector, based on a 1 in 50 security standard. The actual calculation of the aggregate NDM SPC reservation is described in the following section. Calculation of the NDM SPC Reservation The NDM SPC reservation for the following gas year is derived from the estimated 1 in 50 peak-day demand for the current gas year. The 1 in 50 peak-day demand for the current gas year is derived from a regression model, which regresses the aggregate NDM daily demand against temperature and other weather variables. The model uses data for the most recent 12 month period, which should include the winter period of the current gas year. The purpose of the regression model is essentially to explain how the aggregate daily NDM demand responds to changes in the weather. The 1 in 50 peak-day demand for the current gas year is then simulated by replacing the actual weather variables in the regression model on a particular date during the current winter period, with the 1 in 50 weather profile. The NDM SPC reservation for the following gas year is then equal to the 1 in 50 peak-day demand for the current gas year plus a provision for the forecast growth in the NDM sector (during the period between the winter of the current and following gas years respectively). Calculation of the NDM RC Reservation The NDM RC reservation for the following gas year is simply set equal to the corresponding NDM SPC reservation. 4. Future Policy 4.1 Proposed Enhancements It will be necessary to modify and enhance the current process in order to cater for ongoing developments in the Irish gas market, which include: The partial liberalisation of the NDM market on the 1 st July 2004 and the award of the Section 2(1) Towns Franchise on the 1 st August 2004, which will require: The development of a methodology to calculate separate SPC reservations for each individual NDM off-take; and The development of short-term transitional arrangements for the period from 1 st July to 30 th September 2004 to cater for the legacy Non-TPA contractual arrangements; 03-Sep-04 Page 5 Decision Document

6 Enhancements to the methodology used to calculate the SPC reservation for distribution connected LDM and DM off-takes to address concerns raised by the CER and other issues (such as the potential temperature sensitivity of the smaller DM off-takes). 4.2 NDM Sector and the FAR Process FAR Process It is proposed to use the relevant processes in the Forecasting Allocation and Reconciliation ( FAR ) business model to calculate an SPC reservation for each NDM off-take. The FAR business model has been agreed by the industry at the Gas Market Opening Work Group ( GMOWG ) forum. The relevant FAR processes are FARH-06 (NDM Peak Load and AQ Calculation), FARH-07 (Supply Point Capacity Setting) and FARH-11 (Banding of End Users by AQ). The detailed application of these process to the NDM SPC calculation is described in Appendix No.1. The starting point for the FAR process is the 1 in 50 peak-day NDM demand for the current gas year, which will continue to be calculated as described in Section No. 3.3 (above). This is used to derive the relevant capacity setting parameters in the FAR process, which are then used to calculate the individual NDM SPC reservations (see Appendix No.1) for: All NDM off-takes that are actively consuming gas, i.e. all NDM off-takes that have a meter fitted, an assigned customer and are not locked; and All the relevant categories of locked NDM off-takes as agreed at the GMOWG forum. SPC reservations have been calculated for all existing NDM off-takes on the Integrated Utility System ( IUS ) database using the above FAR process. SPC reservations will also automatically be calculated for any new NDM off-take as they are created on the IUS system. In essence the FAR process will calculate a capacity for each NDM off-take on the IUS system. The number of NDM off-takes on the IUS system will obviously vary on a day by day basis, depending on the number of new connections and isolations etc. The NDM SPC reservation charged to shippers may, therefore, also vary on a day by day basis depending on the number of NDM off-takes in their portfolio. This is obviously a departure from the current process where the NDM SPC reservation remained constant throughout the gas year. Phased Introduction of the FAR Capacity Setting Process It is proposed, however, that the FAR capacity setting process should be introduced on a phased basis due to the legacy Non-TPA contractual arrangements in place with the incumbent shipper for the current gas year (see Section No. 4.3) It is proposed, therefore, that FAR capacity setting should only be applied to NDM off-takes that transfer to another shipper during the period from 1 st July to 30 th September It is proposed that the FAR capacity setting process should be applied to all NDM off-takes from the 1 st October 2004 onwards, i.e. once the Non-TPA contractual arrangements for the current gas year expire. 03-Sep-04 Page 6 Decision Document

7 It is proposed that the SPC reservations calculated for all NDM off-takes for the 1 st July 2004 should continue to apply until the 1 st October 2005, subject of course to any changes to the FAR business model approved at the GMOWG forum. Thereafter, it is proposed that should be reviewed and updated annually. 4.3 NDM Transitional Arrangements for 1 st July to 30 th September 2004 There is already a legacy Non-TPA capacity reservation in place with the incumbent shipper for the current gas year. It is therefore, proposed that the NDM SPC reservation for the period from 1 st July to 30 th September 2004 should be equal to their Non-TPA reservation as at 30 th June 2004 less the SPC reservation (calculated using FAR) of any NDM off-take that transfers to another shipper during that period. This approach has been incorporated into Code Modification No.28, which came into force on 1 st July It should be emphasised that this is a temporary once off measure that is solely due to the legacy Non-TPA contractual arrangements in place during the current gas year. It will in any case expire at the end of the current gas, i.e. on 30 th September Section 2(1) Towns Franchise It is proposed to use the FAR process to calculate an appropriate SPC reservation for the successful Section 2(1) Towns Franchise shipper. The RC reservation will simply be equal to the aggregate SPC reservation for the Section 2(1) Towns. 4.5 SPC Reservations for Distribution Connected DM Off-takes Short-tern Review The current SPC reservations for distribution connected DM sites were originally calculated in June Since many of these sites were NDM at that particular point in time, it was necessary to calculate an SPC reservation using the PMC formula of Section 3.2 (above). The PMC formula, however, was only ever intended as an interim measure to overcome the lack of historical DM consumption data. There is now sufficient historical DM consumption available for most distribution connected DM sites on either the Distribution SCADA or Gas Transportation Management System ( GTMS ). It is, therefore, proposed to review the current SPC reservations using actual historical DM consumption data for the 12-month period from 1 st July 2003 to 30 th June 2004, provided it is available from the 1 st January 2004 onwards - i.e. provided it covers the winter period of the current 2003/04 gas year. In all other cases it is proposed to calculate the corresponding PMC for the period from 1 st January to 30 th June 2004 using the following multipliers proposed by the Commission for Energy Regulation ( CER ), namely: 03-Sep-04 Page 7 Decision Document

8 No. Working Days Multiplier 7 Working Days: Working Days: Working Days: 1.09 The PMC for the period from 1 st January to 30 th June 2004 would be compared with the corresponding PDR over the same period (if available). The SPC would then be set equal to the higher of the PDR or PMC. If no PDR was available then the SPC would be simply set equal to the PMC. Please refer to Appendix No.2 for a more detailed explanation of the calculation of the PMC for a distribution DM off-take. It is proposed to complete this review during August/September 2004, so that the revised capacities can be implemented for 1 st October 2004, i.e. in time for the 2004/05 gas year. New DM Connections In the event of a new DM connection then the end-user/their shipper will notify their initial capacity requirements i.e. the Initial SPC - to BGT. The Initial SPC will be reviewed and revised during the next Annual Review Cycle (see Section No.5), unless it has been set for a Minimum Period see the next paragraph. If the end-user elects to pay some of their connection costs through the tariff per CER/03/190 Commission Decision on Gas Distribution Connection Policy (07/08/2003), then the Initial SPC will apply for a Minimum Period (determined by the economic test). It will then be reviewed during the first Annual Review Cycle following the expiry of the Minimum Period. Change of Classification In the event that a DM off-take is reclassified as an NDM off-take then its SPC reservation will be set equal to the PDR for the following gas year. The SPC reservation will be reviewed using the FAR capacity setting methodology for subsequent gas years. In the event that an NDM off-take is reclassified as a DM off-take then its SPC reservation will be set using the PMC methodology. Longer-term Review The above review will hopefully address many of the issues raised in relation to the current SPC reservations for distribution connected DM off-takes. Many of the smaller distribution connected DM off-takes may, however, be temperature sensitive. The current methodology of basing their SPC reservation on their historical peakday consumption may not be sufficient, therefore, given the relatively mild winters experienced in recent years. It is, therefore, proposed to develop a more robust methodology during the 2004/05, which will take account of both the historical peak-day consumption and the potential temperature 03-Sep-04 Page 8 Decision Document

9 sensitivity of each distribution connected DM off-takes. The revised SPC reservations would be in place for 1 st October 2005, i.e. in time for the 2005/06 gas year. 5. Annual Review Cycle It is proposed to formalise the above process going forward to ensure that it is completed within the following timescale: BGT will review all DM and NDM SPC reservations in accordance with Section No.4 (above) during June of each year, in order to set revised DM and NDM SPC reservations for the following gas year: In the case of existing DM off-takes the SPC reservation will be reviewed in accordance with Section No. 4.5 using historical data for the 12-month period from 1 st June to the 30 th May as follows: If there is historical DM consumption data available from the 1 st January onwards then the SPC reservation will be set equal to the PDR for that period; and If the historical DM consumption data only becomes available after 1 st January then the SPC will be set equal to the higher of the PMC or PDR for the period from 1 st January to 30 th May; In the case of new DM off-takes the SPC will be based on the Initial SPC notified by the end-user/their shipper to BGT; and The NDM SPC reservations will be reviewed in accordance with the relevant capacity setting process specified in the FAR business model (see FARH-07 and Appendix No.1 for further details); BGT will make the revised SPC reservations for the following gas year available to the existing shippers by close of business on the last Friday in June; Shippers will have a two-week period to review the proposed SPC reservation of endusers supplied by them, and should notify any comments by close of business on the second Friday in July; BGT will finalise all SPC reservations for the following gas year and send them to the GPRO who will update the Eligibility List; The GPRO will forward the revised Eligibility List to the CER by the close of business on the first Friday in June. The CER will then make the revised Eligibility Listing available to shippers (and other parties as appropriate); and The revised SPC reservations will then become effective on the 1 st October of the following gas year. The above process will be first completed during June/July of 2005 in order to revise all SPC reservations for the 2005/06 gas year. 03-Sep-04 Page 9 Decision Document

10 6. Capacity Ratchets Interim Market Arrangements If the actual DM consumption of any LDM or DM off-take exceeds its SPC and/or RC reservation during the period prior to the introduction of the Unified Code of Operations (UCOP), then the SPC and/or RC reservation will be ratcheted upwards to match the new level of DM consumption for the off-take in accordance with Appendix No.2 of the current Code of Operations. The revised SPC and/or RC reservation will also be applied retrospectively to the start of the contract year for that off-take. It should be noted that the above Capacity Ratchet mechanism has only been agreed as part of the Interim Market Arrangements and will, cease to apply when the UCOP comes into effect. 7. Summary Conclusions It is proposed in principle to use the FAR process to calculate SPC reservations for NDM off-takes going forward as agreed at the GMOWG forum. It is proposed, however, to phase the introduction of the FAR process due to the legacy Non-TPA contractual arrangements in place for the current gas year - by initially only applying it to NDM off-takes that transfer from the incumbent shipper during the period from 1 st July to 30 th September The NDM SPC reservation for the incumbent shipper from 1 st July to 30 th September 2004 should be equal to their Non-TPA reservation as at 30 th June 2004 less the SPC of any NDM off-take (calculated in accordance with FAR) that transfers to another shipper during that period in order to cater for the legacy Non-TPA contractual arrangements in place for the current gas year. It is, however, proposed to apply the FAR process to all NDM off-takes from 1 st October 2004 onwards, i.e. once the above legacy Non-TPA contractual arrangements expire. The SPC reservation for the successful Section 2(1) Towns Franchise shipper will be set using the FAR process from 1 st August 2004 onwards. It is proposed to review the SPC reservation for all distribution connected DM off-takes using the most recently available historic DM consumption data and using the revised PMC multipliers proposed by the CER with revised SPC reservations being implemented on 1 st October In addition it is proposed to incorporate a statistically valid methodology into the current calculation of SPC reservations for distribution connected DM off-takes, which will take account of both their historical peak-day consumption and their temperature sensitivity with revised SPC reservations being implemented on 1 st October The timetable for implementing all of the proposed changes to the current process is summarised in Table 7.1 (below). 03-Sep-04 Page 10 Decision Document

11 Table No. 7.1: Timetable for Implementing Changes Date Change Prior to 1 st Jul-04 An individual capacity reservation will be calculated for each NDM site using the FAR capacity setting processes. 1 st Jul => 30 th Sep-04 NDM SPC reservation for the incumbent shipper will be equal to their Non-TPA reservation on 30 th June less the SPC reservation (calculated by FAR) of any NDM off-take that transfer to another shipper. The SPC reservation of any NDM off-take that transfers to another shipper will be calculated using the FAR process. The SPC reservation for the Section 2(1) Towns will be calculated using the FAR process. SPC reservations for distribution connected DM off-takes will be reviewed using the most recent historical DM consumption data and revised PMC multipliers proposed by the CER. 1 st Oct-04 => 30 th Sep-05 SPC reservation calculated by the FAR process will be applied to all NDM off-takes. Revised SPC reservations for distribution connected DM offtakes will be implemented on 1 st Oct-04 for 2004/05 gas year. Enhancement to methodology for calculating SPC reservation for distribution connected DM off-takes will be developed - to include statistically valid approach for taking temperature sensitivity into account this enhanced methodology would obviously be subject to review by the CER and would not be applied until the 2005/06 gas year. 8. CER Approval BGT request the approval of the CER for the methodologies outlined in this report for the determination of capacities across the various identified categories. Furthermore it is recommended that the capacities for all NDM sites should be determined pursuant to the approved methodology for the 15 month period to 30 th September 2005, and reviewed thereafter on an annual basis. 03-Sep-04 Page 11 Decision Document

12 Appendix No.1: FAR Capacity Reservation Process 8.1 Calculation of the Peak-day Demand The peak-day demand of each NDM off-take is first estimated as follows using FARH-06, depending on whether or not the off-take has a negative B-coefficient: Peak-day Demand = A OFF + B OFF AWDD PEAK if B OFF 0 (a1) OR Peak-day Demand = AQ OFF if BOFF < 0 (a2) 365 Where: A OFF : A-coefficient for the NDM off-take B OFF : B-coefficient for the NDM off-take AWDD PEAK : AWDD value on the 1 in 50 peak-day AQ OFF : Annual Quantity of the NDM off-take The AWDD PEAK variable is derived directly from the 1 in 50 NDM peak-day demand for the current gas year (see Section No. 3.3) by back-solving the following equation: NDM PEAK = A TOT + B TOT AWDDPEAK (a3) Where: NDM PEAK : 1 in 50 peak demand for current gas year (see Section No. 3.3) A TOT : Aggregate A-coefficient of all live NDM off-takes on peak-day B TOT : Aggregate B-coefficient of all live NDM off-takes on peak-day The NDM 1 in 50 peak-day demand is assumed to occur on during the middle of January, and the date of 13 th January is normally assumed for convenience of calculation. It is currently proposed that A TOT and B TOT should be derived from the aggregate A and B coefficients of all NDM off-takes that have a meter fitted, an end-user assigned and are not locked, i.e. all of the live NDM off-takes that are actively consuming gas. Locked meters obviously cannot consume gas and are, therefore, excluded from (a3) above in order to avoid distorting the AWDD PEAK calculation. A capacity will, however, be calculated for the relevant categories of locked NDM off-takes as agreed at the GMOWG forum. A capacity Scaling Factor ( SF CAP ) is also applied to the peak-day demand of each NDM off-take, to ensure that the bottom-up aggregate of the peak-day demands matches NDM PEAK : SF CAP = NDM PEAK (Peak Demand) SP This scaling is necessary due to (a2), which breaks the consistency between the AWDD PEAK and NDM PEAK calculation in (a3). (a4) 03-Sep-04 Page 12 Decision Document

13 8.2 Capacity Setting Process Existing I/C NDM Off-takes The SPC capacity reservation for Industrial/Commercial ( I/C ) NDM off-takes is set equal to their scaled peak-day demand calculated using (a1), (a2) and (a4) above (per FARH-07): I/C Capacity = (A OFF + B OFF AWDD PEAK ) SF CAP if B OFF 0 (a5) OR I/C Capacity = AQ SF 365 OFF CAP if B OFF < 0 Existing Residential NDM Off-takes The residential SPC reservations are, however, calculated using the concept of an Average Load Factor ( ALF ) for the residential sector: SPC of RES Off-take = AQOFF SF 365 ALF CAP RES The ALF RES is, however, derived from the aggregate peak-day demand and AQ of the residential sector as per FARH-11, which is calculated using (a1) and (a2) - and doesn t, therefore, have any impact on the overall aggregate SPC reservation for the residential sector. New NDM Off-takes In the event of a new NDM off-take the SPC reservation for that off-take will be set in accordance with the relevant default processes specified in the FAR business model, namely FARH-01, FARH-06, FARH-07 and FARH-11, unless an Initial SPC has been agreed for a Minimum Period between BGT and the end-user/their shipper. If no Initial SPC has been agreed between BGT and the end-user/their shipper, then the following FAR default process will be used to set the SPC (see FARH-01 for details): The SPC will be derived from the Property/Premise Type provided by the shipper in the case of a residential off-take; The SPC will be derived from the estimated AQ provided by the shipper for I/C off-takes if the estimated AQ is less than 73,000 kwh; and The SPC will be set equal to the estimated 1 in 50 peak-day demand provided by the shipper if the estimated AQ is equal to or greater than 73,000 kwh. The SPC calculated using the above FAR default process will be reviewed during the next Annual Review Cycle (see below), and revised for the subsequent gas year. If an Initial SPC has been agreed between BGT and the end-user per CER/03/190 (07/08/2003) then it will apply for the Minimum Period (determined by the economic test). The Initial SPC will then be reviewed during the next Annual Review Cycle following the expiry of the Minimum Period, and will be revised for the start of the following gas year. (a6) (a7) 03-Sep-04 Page 13 Decision Document

14 NDM SPC Annual Review Process The estimated 1 in 50 peak-day demand for the NDM sector (i.e. NDM PEAK ) will be reviewed during each gas year, and used to update the AWDD PEAK and SF CAP variables, using (a3) and (a4) above. The annual review of NDM PEAK, AWDD PEAK and SF CAP will be completed by the 1 st June of each year. The updated AWDD PEAK and SF CAP will then be used to revise each NDM SPC reservation for the following gas year using (a5), (a6) and (a7), together with the A OFF and B OFF coefficients for each NDM SP on the date that the process is run on the IUS system. It is intended to complete the NDM SPC annual review process for all NDM SPs during June of each year, and in sufficient time to allow the revised SPC reservations for the following gas year to be released to their existing shipper for review by the close of business on the last Friday in June of each year. Proposed Changes to the FAR Business Model The incumbent shipper has formally proposed that the process for calculating I/C SPC reservations should also be based on the concept of an ALF, however, they have suggested more than one ALF for the I/C NDM sector. The current proposal is that there should be seven AQ bands for the I/C NDM sector with a separate ALF for each AQ band. The ALF for each AQ band would be derived from the aggregate peak-day demand and AQ of all the I/C NDM off-takes in each AQ band. The SPC reservation for each I/C NDM off-take would then be calculated: SPC of I/C Off-take = AQOFF SF 365 ALF CAP I/C BAND Locked NDM Off-takes An SPC reservation will be calculated for all the relevant categories of locked NDM off-takes as agreed at the GMOWG forum. The method for calculating the SPC reservation for a locked NDM off-take is identical to that used for an unlocked NDM off-take. The process for calculating the A and B coefficients for a locked NDM off-take is described in FARH-01. Change Control Process This appendix summarises the detailed implementation of the NDM capacity setting process as defined in the current version of the FAR business model, i.e. the baseline model Version 1.5 (2 nd April 2004). The GMOWG/CER may agree future amendments to the FAR business model and/or its successor document under the Unified Code of Operations. BGT will obviously implement any agreed changes within the timescale agreed with the GMOWG/CER. (a8) 03-Sep-04 Page 14 Decision Document

15 Appendix No.2: Detailed Calculation of PMC The PMC formula may be summarised as follows: PMC = PMDA M Where: PMDA: Peak Month Daily Average ( PMDA ) M: Multiplier based on deemed No. days in working week M = 1.15 for a 7-day working week M = 1.12 for a 6-day working week M = 1.09 for a 5-day working week The PMDA is calculated from the actual monthly meter reads that were used to bill the distribution DM site, using the following rules: All meter reads taken during the 12-month period between 1 st July 2003 and 30 th June 2004 are used to derive the PMC for the site; The metered consumption between each meter read and the previous read is calculated; The number of days between each meter read and the previous read is also calculated; The Monthly Daily Average ( MDA ) for each month is then calculated as the simple daily average of the metered consumption over the meter read period, adjusted for the deemed number of days in the working week for that site: MDA = No. of Metered kwh days between Reads No. of days in 7 Working Week The PMDA is set equal to the highest MDA during the period from 1 st January to 30 th June The application of the above methodology is best illustrated with a worked example. The meter history for a hypothetical distribution DM customer is shown in Table No.A2.1 (next page) for the period from the 1 st January to 30 th June It is important to note that the PMDA calculation is based on the meter read dates of the customer billing cycle, and do not coincide exactly with the calendar month as can be seen from Table No. A2.1. The first meter read after the 1 st January occurred on the 28 th January The previous meter read occurred on the 19 th December The meter read on the 28 th January 2004, therefore, covered a period of 40-days, and the corresponding metered consumption was 915,217 kwh. The site is assumed to have a 7-day working week. The MDA for the period from 19 th December 2003 to 28 th January 2004 is, therefore, given by: 03-Sep-04 Page 15 Decision Document

16 MDA = 915,927 kwh 7 = 22,898 kwh 40 days 7 days in Working Week Table No. A2.1 Illustrative Calculation of PMDA for a Hypothetical Customer Meter Read Date Metered Consumption No. of Days between Reads No. of Days in Working Week PMDA Calculation (kwh/day) (kwh) 19-Dec , Jan , , Feb , , Feb , , Mar , , Apr , , May , , Jun , ,428 The PMDA for the site is simply equal to the maximum of all the above MDA calculations i.e. 24,106 kwh for the period from 27 th February to 29 th March The corresponding PMC is then simply given by: PMC = 24, = 27,722 kwh 03-Sep-04 Page 16 Decision Document