Presentation regarding Implicit Allocation Mechanism (IAM) proposed by Interconnector UK. Provides a brief summary, reviews strong and week points of the mechanism, and proposes changes for better implementation of the mechanism
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
8. Benefits to Shippers
• 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
9. Benefits to Market
• 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
10. Benefits to IUK
• 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
11. Gaming Prevention
• Increases return on capacity allocation (from both auctions and IAM)
• Incentivises longer-term bookings
• Improve utilisation of existing capacity
12. 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
13. 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