Ofgem has given final approval to a modification of the Uniform Network Code that will reinstate the short-haul discount that was previously removed as part of an overhaul gas transmission charges.
UNC728B will provide a discount of between 10 and 90 per cent on gas transmission charges for users connected within 28 kilometres of an entry point to discourage them from constructing their own pipelines to bypass the network.
The new discount will replace the Optional Commodity Charge that was removed as part of the code modification UNC678A. The modification took effect on 1 October 2020 and introduced a new methodology for setting the reference prices for capacity auctions, dubbed the “postage stamp” model, which reduced the variation between entry and exit points in different parts of the country.
In approving the modification in May 2020, Ofgem said it did not want to remove the discount but that none of the alternative modifications were compliant with EU regulations. The following June National Grid Gas Transmission proposed UNC728 to reintroduce the discount, whilst four alternatives lettered A through D were also submitted by South Hook Gas Company, Vitol, RWE and Eni.
In its minded-to decision in January, Ofgem selected UNC728B as its preferred option. It said UNC728D, which would apply a flat 90 per cent discount to users connected within 5 kilometres of an entry point, was also preferable to the status quo but judged the discount offered as higher than necessary to discourage bypass of the transmission network.
Ofgem has now confirmed its decision to implement UNC728B. It said a majority of respondents to the consultation on its minded-to decision agreed with its assessment, although several parties argued the discount would not be sufficient to discourage bypass of the transmission network along some routes and that there is no credible risk of bypass at distances of greater than 5 kilometres.
The discount under UNC728B will only apply to transmission services charges. The discount under UNC728D would have also covered non-transmission services charges.
The regulator has set the implementation date for 1 October 2021 – exactly one year on from the removal of the original discount.