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IAM Proposal Benefits Shippers Markets and IUK
- 1. Implicit Allocation Mechanism Summary, market response and proposals for improvement
- 2. What is IAM Implicit Allocation Mechanism (IAM) is a new way for IUK to offer capacity to the market Allows market participants to purchase capacity when they choose Provides markets with the ability to buy capacity when a shift in price spreads creates an economic rationale
- 3. Purpose of IAM Provide greater access to IUK capacity Promote cross-border flows Grant more flexibility for capacity purchase Incentivise market correcting transactions Better utilise IUK capacity
- 4. Market Response Project Support Support Against Unsure BP Centrica EDF ENOI National Grid OMV Gas RWE Engine Statoil Gazprom Shell
- 5. Market Response Positive Negatives + Full market exposure + Limited capacity bookings + More opportunities for shippers - Tariff policy - Complexity of multipliers - Lack of market indicators - Price volatility
- 6. Proposal Support Benefits to Shippers Benefits to Market Benefits to IUK Gaming Prevention
- 7. Proposal Benefits Benefits to Shippers Benefits to IUK Benefits to Market Gaming Prevention
- 8. • Only one entity being able to buy capacity • Overbooking of bundled capacity • Reducing secondary market sales and overpricing • Incentivise NGG to reduce capacity costs • Reducing necessity of overbooking • Increases return on capacity allocation (from both auctions and IAM) • Incentivises longer-term bookings • Improve utilisation of existing capacity • Reducing the risk of paying for unneeded capacity • Allowing smaller Shippers to secure access to capacity • Improving access to and utilisation of existing storage • Reducing the need to invest in new storage facilities • Limiting negative impacts on end consumers • Reduces risk of long-term booking • Allow shippers to optimise their portfolio • Reduce allocation costs improving market accessibility • Shipper doesn’t have to deal with mismatch of capacity & gas commodity • Shippers can buy capacity at any time under a simple process Proposal Benefits Benefits to Shippers Benefits to IUK Benefits to Market Gaming Prevention
- 9. Proposed Suggestions Fixed tariffs on all products Simplification and predictability in multiplier application Gaining additional market indicators via issuing IAM Lowering volatility & improving long-term planning
- 10. Tariff Policy • For all IAM products • 3% to 5% Below average for 2nd-3rd last auctionsFixed Tariff (3-5% discount) • Dividing one year into 4-6 seasonal maximums • Each with a fixed multiplierSeasonal Maximums • Calculate for each product • Results are to be published as IAM pricesSeasonal Tariff Calculation • IUK’s will announce its readiness to acquire excess capacity from any TSOs, Brokers/Traders (acquired from IUK)Readiness for Acquisition • Fixed prices are not to be changed more than once every three years Commitment 1. Encouraging large TSOs to acquire small capacity volumes 2. stimulate TSOs to acquire as much volume as possible 3. Increase revenue 4. Ensure a greater utilisation of existing capacity 5. Make the prices more lucrative both via CAM NC Auction and IAM 6. Lower price volatility
- 11. Multiplier Application Feedback Magnitude Method Margin Test 10% Test Market Reaction Customers Bookings Additional Indicators 30% Test Magnitude Effect
- 14. Conclusion A well-timed proposal Positive overall response Regulatory readiness
- 15. Questions?