Review Group 221: Option 3 security provided after allocation

1
Review Group 221 Option 3 security provided
after allocation
2
Security Provision Timing Options Discussed by
RG221
3
Option 3 security provided after provisional
allocation

• Option 3 Security is provided within one month of
  the provisional allocation taking place.
• User provides their security within 30 days of
  the provisional allocation

• RG Meeting 26 Feb
• Option 3 identified as preferred option but in
  the event of a User failing to provide security
  NG would not look to re-run auction allocations
  or assess impact on other auction participants

4
Amendments to QSEC auction process to accommodate
option 3
5
Does this process work?

• Scenario 1 One User bidding for baseline
  capacity at an existing ASEP
• User fails to provide Security
• Provisional allocation removed
• Unsold baseline capacity considered as part of
  substitution and/or offered for sale again at
  next relevant auction
• Process Works? Yes

ü
6
Does this process work?

• Scenario 2 One User bidding for Incremental
  capacity at a new ASEP
• User fails to provide Security
• Provisional allocation removed
• NG will write to Ofgem to inform them that the
  allocation has been removed and that the revenue
  driver will not apply
• Process works? Yes

ü
Process has potential impacts on investment
lead time if User does put credit in place
7
Does this process work?

• Scenario 3 Multiple Users bidding for
  Incremental capacity at a new ASEP for example
  Milford Haven
• Provisional allocations User A 100 units, User
  B 180 units User C 30 units
• User A fails to provide Security
• Provisional allocation for User A removed
• Remaining bids for Users B and C no longer pass
  Economic Test (300 units required)
• Provisional allocation for User B and User C also
  removed
• NG will write to Ofgem to inform them that the
  allocations have been removed and that the
  revenue driver will not apply
• Users B and C would need to discuss with NG, the
  prospect of holding an adhoc auction at a later
  date - investment process delayed pending new
  auction
• Process works? Yes?

û
ü
8
Does this process work?

• Scenario 4 Multiple Users bidding for
  Incremental capacity and baseline at an existing
  ASEP
• Provisional allocations User A 100 units, User
  B 180 units User C 30 units
• User A bids for both baseline and incremental but
  fails to provide Security
• Provisional allocation (baseline and incremental)
  for User A removed
• Remaining bids for Users B and C no longer pass
  Economic Test (300 units required)
• Provisional allocation for capacity for User B
  and User C removed
• NG will write to Ofgem to inform them that the
  allocations have been removed and that the
  revenue driver will not apply
• Baseline is available for substitution
• Users B and C would need to discuss prospect of
  holding an adhoc auction with NG
• Process works? No

û
9
Scenario 4 Multiple Users bidding for
Incremental capacity and baseline at an existing
ASEP

• Easington 2006 QSEC Auction
• 19 Users buying baseline capacity 12 Users
  buying incremental capacity and baseline capacity
• Baseline capacity value - 153m Incremental
  capacity value - 14m