Gas Security of Supply Significant Code Review - Impact Assessment for Final Policy Decision

Publication date
12th February 2014
Information type
Policy area

The aim of the Gas Security of Supply Significant Code Review (Gas SCR) is to reduce the likelihood, severity and duration of a gas deficit emergency. We want to ensure that in an emergency the market rules provide appropriate incentives on gas shippers to balance supply and demand. We also propose a demand side response (DSR) mechanism for paying large consumers if they are able to reduce their demand before an emergency. This is intended to avoid or minimise an emergency and protect consumers that incur high costs when interrupted.

This impact assessment should be read alongside our policy decision document, which explains our proposals. It looks at the costs and benefits of our policy and builds on previous impact assessments that we have published as part of the Gas SCR. For this impact assessment we commissioned Pöyry to conduct quantitative modelling. Detail on their modelling approach and findings can be found in their full report.

Our analysis shows that GB remains resilient to threats to supply. Nevertheless, the future remains uncertain and our reforms to cash-out are intended to address that. In a gas deficit emergency the costs to consumers would be extremely high and there would be very significant benefits from greater levels of DSR. Therefore, given the uncertainties and potentially very high costs we think it is prudent to implement cash-out reform and a DSR mechanism.