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: 24th Feb 2005
  • Agendas, minutes and presentations
  • 2 Associated documents
Cash out review working group 8 - 14 February 2005.

  • Published: 24th Feb 2005
  • Agendas, minutes and presentations
  • 2 Associated documents
Cash out review working group 9 - 21 February 2005.

  • Published: 31st Jan 2005
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash out review working group 4 - January 2005.

  • Published: 31st Jan 2005
  • Agendas, minutes and presentations
  • 2 Associated documents
Cash out review working group 5 - January 2005.

  • Published: 19th Jan 2005
  • Agendas, minutes and presentations
  • 3 Associated documents
Cash out review working group 3 - January 2005.

  • Published: 22nd Dec 2004
  • Agendas, minutes and presentations
  • 3 Associated documents
Cash Out Review Working Group 2 December 2004.

  • Published: 6th Dec 2004
  • Consultations and responses
  • 1 Associated documents
Summary of responses from the Electricity and Gas Cash Out Review document.

  • Published: 6th Dec 2004
  • Agendas, minutes and presentations
  • 6 Associated documents
Cash Out Review Working Group 1 December 2004.

  • Published: 18th Aug 2004
  • Reports and plans
  • 1 Associated documents
Gas and electricity cash out review: the way forward.

  • Published: 17th May 2004
  • Consultations and responses
  • 1 Associated documents
This document is designed to provide the necessary background to the more detailed analysis of specific areas that will follow. It describes the current cash out arrangements in some detail and explains which areas of the cash out arrangements Ofgem...

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