Our priority is to protect consumers’ interests, which we do through the promotion of effectively functioning markets and networks. Transmission companies charge users of the networks and these costs are passed through to consumers.
We launched the Gas Transmission Charging Review (GTCR) in June 2013 with a Call for Evidence, to look at the structure of GB gas transmission charging regime. The current regime has served consumers well by promoting the efficient use of the network and facilitating effective competition. However, significant and ongoing structural changes to the GB gas market since the system was designed, and emerging EU legislation to harmonise transmission charges across Member States (EU Network Code on Tariffs), have prompted us to conduct a review. We wanted to consider what changes to the charging regime, if any, might further the interests of current and future consumers.
What we looked at
Having considered the stakeholders’ responses to our Call for Evidence, we focused our review on selected aspects of charging, rather than conducting a full significant code review. In line with our principal objective under the Gas Act 1986 to protect the interests of existing and future gas consumers, we set out criteria for assessing different charging regimes:
- Economic efficiency in both the short run and the long run.
- Impact on cross-border trade.
- Reflection of developments in the transportation business.
- Impact on security of supply.
We have also taken account of our statutory duty to ensure compliance with European law. This includes compliance with the Tariff network code and the wider European network codes, which informed our baseline assessment.
On 12 December 2014 we published our policy position on GB gas transmission entry charging regime, proposing two key changes:
- introducing “fully-floating” capacity charges for long-term capacity products; and
- changing the charging arrangements for short-term capacity products.
Fully-floating capacity charges would mean that the historical costs of the network are shared between all users who book capacity. They should also reduce transaction costs for cross-border trade in gas. We would expect these two effects to encourage bookings that are closer to anticipated flows, and to reduce the potential disincentive to import gas onto the GB system.
Reducing short-term capacity discounts would introduce a locational signal to users booking short-term capacity. This should help promote the efficiency in planning, operating and maintaining the network.
The publication of our policy position in December marked the beginning of our consultation period, which is due to close on 27 March 2015.
On 30 January 2015 we published a more detailed follow-up consultation document to assist our stakeholders in formulating their response to the consultation. It provided more information on our review and proposals for change. It also set out our assessment of the potential impacts of the proposals on transportation charges and security of supply, and potential distributional effects. The document posed a number of specific consultation questions, seeking stakeholders’ views by 27 March 2015.
We will consider all responses to this consultation before reaching a decision on the steps we will take after that. We will also take into account the content of the final EU Network Code on Tariffs, and any steps needed to implement it. We will work with industry to identify what changes should be made to the GB regime, and when would be the best time for them to come into force.
Engaging with our stakeholders
We have been open and transparent in our policy making process, and engaged with the relevant stakeholders through the review.
We held stakeholder engagement events in December 2013, July and August 2014 and provided regular updates at industry meetings including the Joint Office of Gas Transporters, the Gas Forum and the Gas Storage Operators Group.
In July 2014 we set up the GTCR technical group to engage with industry stakeholders in the development of tools to model the impacts of our proposed changes. We presented the initial modelling results at an open industry event on 14 October 2014. Documents relating to the technical group, including the conclusions report delivered at the Gas Forum are available on our website.
We held an open forum on 25 February 2015 for any questions stakeholders had regarding the initial assessment of impacts set out in the consultation document. You can view the presentation from this event.
Get in touch
To get in touch with us, please email us.