by Roger Milne
The gas industry has expressed guarded optimism that Ofgem may be about to give ground over its controversial proposals for major reform of gas emergency cash-out arrangements.
The sector is firmly opposed to Ofgem’s proposals, which are intended to improve security of supply. The reforms are the subject of the first ever Significant Code Review, a process that allows the regulator greater powers to push through licence condition changes and alter the industry’s key Uniform Network Code (UNC).
Under its plan, Ofgem would set a cap on cash-out levels and instigate a compensation scheme for customers. Trade body the Gas Forum said this could lead to ”shipper insolvency and market malfunction”.
Forum managing director David Cox pointed out that from the outset the industry argued that Ofgem’s reforms were fundamentally flawed, but has now concluded they are “unworkable”.
However, the industry has taken heart from the regulator’s decision to allow the industry to raise a formal modification to the UNC (number 0435). This modification, proposed by British Gas, reflects a number of the key principles canvassed by the forum as an alternative to Ofgem’s proposals.
Cox said: “We are encouraged from early indications that Ofgem is allowing the mod to progress and will fully evaluate its recommendations alongside the consultation responses and the government’s upcoming announcements.”
‘UK needs lots more seasonal gas storage’
The UK urgently needs more seasonal gas storage facilities if it is to avoid growing vulnerability to import disruptions. That is the central conclusion of a report commissioned by energy giant Centrica from consultancy Eclipse Energy Group.
It highlighted that from 2020, the UK would be increasingly dependent on the global market in liquefied natural gas (LNG) and at risk of problems with ageing UK and Norwegian gas production and delivery infrastructure. The report suggested that extra gas storage capacity of around 3 billion cubic metres will be required.
This article first appeared in Utility Week’s print edition of 2nd November 2012.
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