Cash out arrangements

The gas markets need to be kept in balance by matching supply and demand within prescribed technical limits. The Gas System Operator, National Grid Gas PLC, has overall responsibility as residual balancer for the system.

In operating the Gas National Transmission System (NTS), National Grid uses various tools to keep the system in balance, including buying or selling gas in the wholesale market. Any actions taken by National Grid for energy balancing purposes are likely to incur a cost.

Cash-out arrangements are operated in both the gas and electricity markets. These arrangements are designed to address the cost of energy balancing incurred by National Grid to the parties who created those costs (those parties who do not balance their inputs and outputs within the relevant balancing period). As such, parties who are not in balance incur charges that reflect the costs incurred by National Grid in addressing the imbalance. These charges are known as cash-out prices.

Cash-out prices are designed to provide market participants with strong commercial incentives to balance their contractual and physical positions and therefore avoid exposure to cash out prices. This may include contracting for supply ahead of time, or by maintaining the reliability of their production plant, for example.

Both of these measures taken in response to the incentives created by cash-out prices, in turn, help secure supply. The cash-out arrangements that would apply in an emergency are being considered as part of  the Gas Security of Supply Significant Code Review.

Publications and updates

  • Published: 11th Aug 2008
  • Closed: 19th Sep 2008
  • Consultations & responses
  • 1 Associated documents
This document is Ofgem’s Impact Assessment for BSC Modification Proposal P217. Ofgem is currently minded to approve Alternative Modification P217, and would welcome the views of interested parties on this initial view.

  • Published: 29th Feb 2008
  • Open letters & correspondence
  • 1 Associated documents
Open letter on BSC modification proposals P211 and P217.

  • Published: 29th Feb 2008
  • Other
  • 1 Associated documents
P212 Main imbalance price based on market reference price.

  • Published: 20th Dec 2007
  • Open letters & correspondence
  • 1 Associated documents
This is an open letter from Ofgem to Elexon requesting views on the likely implementation timescale for P217, in particular on whether there is scope to shorten the process, and noting the linkages with P211 and P212.

  • Published: 20th Dec 2007
  • Closed: 31st Jan 2008
  • Consultations & responses
  • 1 Associated documents
This document presents Ofgem's Impact Assessment for Proposed Modifications P211 and P212 for consultation. Both modifications seek to remove potential distortions in the cash-out arrangements by amending the calculation of energy imbalance prices.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash-out Review Meeting 2 - Presentation.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash-out Review Meeting 2 - Ofgem Balancing Market.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents

  • Published: 4th Apr 2007
  • Agendas, minutes and presentations
  • 4 Associated documents
Cash-Out Review, Industry Meeting, 30 March 2007 Meeting Note.

  • Published: 22nd Mar 2007
  • Closed: 22nd Mar 2007
  • Consultations & responses
  • 1 Associated documents
On 8th February, Ofgem presented to the BSC Panel its proposed programme for taking forward a review of the electricity cash out arrangements.

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