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: 20th Oct 2006
  • Other
  • 1 Associated documents
See this decision and notice letter issued on 20 October 2006, approving P205.

  • Published: 23rd Mar 2006
  • Other
  • 1 Associated documents
amend the main energy imbalance price such that only a predefined volume of balancing actions will contribute to the calculation of a volume weighted imbalance price. Ofgem issued this decision letter on 23 March 2006, approving P194.

  • Published: 26th Jan 2006
  • Consultations and responses
  • 1 Associated documents
This document sets out, for consultation, Ofgems Impact Assessment (IA) on a proposal to change the rules governing the wholesale electricity market. The industry and customers are divided on the proposal, although the majority do not support it.

  • Published: 16th Dec 2005
  • Agendas, minutes and presentations
  • 9 Associated documents

  • Published: 18th Mar 2005
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash Out Review Working Group 12- 21 March 2005

  • Published: 7th Mar 2005
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash out review working group 11- 11 March 2005.

  • Published: 1st Mar 2005
  • Agendas, minutes and presentations
  • 2 Associated documents
Cash out review working group 10 - 2 March 2005.

  • Published: 24th Feb 2005
  • Agendas, minutes and presentations
  • 7 Associated documents
Cash out review working group 6 - 4 February 2005.

  • Published: 24th Feb 2005
  • Agendas, minutes and presentations
  • 2 Associated documents
Cash out review working group 7 - 7 February 2005.

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