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Garbage in; garbage out – Gas industry takes action to improve settlement accuracy

Steven Britton Steven Britton Senior Analyst
9th May 2018

Two Uniform Network Code (UNC) modifications have been raised that would place obligations on shippers to provide more information to Xoserve for the purposes of improving the allocation of gas, and hence reduce Unidentified Gas (UIG) volumes.

UNC652 Obligation to Submit Reads and Data for Winter Consumption Calculation was raised by npower and would make it mandatory for shippers to provide reads at the start and end of winter for each of their sites in End User Category (EUC) bands 3 to 8. These cover non-daily metered (NDM) sites that use 293,000kWh (10,000 therms) or more each year. This information will be used for calculating their winter consumption, and hence ensure they are placed in the correct Winter Annual Ratio (WAR) band (a measure of how sensitive consumption is to cold weather). Currently, around 25% of all these sites are in the default WAR band, meaning that their consumption characteristics are unlikely to be accurately represented in NDM demand estimation, and hence will be contributing to the size and volatility of UIG.

The other modification is E.ON’s UNC654 Mandating Provision of NDM Sample Data, which would make it compulsory for all shippers to provide Xoserve with consumption data for their NDM sites on an annual basis. This will be used to help refine the parameters used in NDM demand estimation, including the creation of new EUC bands to represent pre-payment customers and small business consumers. The fact that the NDM data sample has shrunk in recent years limits the accuracy of the calculated parameters, hence why E.ON is keen that it should be made as large and representative as possible. It has been estimated that inaccuracies in NDM demand estimation represent about two thirds of the allocation error present within UIG.

In short, both these modifications should help reduce UIG by allowing NDM consumption patterns to be more accurately reflected in the settlement process. Between them they will capture all NDM sites, with UNC652 being relevant for large consumers and UNC654 being most important for smaller ones. It is very encouraging to see the industry taking this action to attack UIG issues from both ends of the NDM spectrum, and taking advantage of the increasing availability of consumption data over recent years. Ofgem has stated that it believes the gas settlement process introduced by Project Nexus is not inherently flawed; the problem lies in inadequate data. With these modifications, we should see that change.

We provide regular coverage of these issues in our weekly regulatory reports. For more information please contact Steven Britton on 01603 604 428 or s.britton@cornwall-insight.com.

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