New Gas Trading Arrangements for Achieving On-the-Day Balance in the NTS - International Law Office

The former flexibility mechanism in Transco's Network Code used to achieve on-the-day balance in the National Transmission System (NTS) has been replaced under the new Gas Trading Arrangements, which came into effect on October 1 1999. It is superseded by a new on-the-day screen-based commodity market (OCM). The OCM is operated by an independent market operator, EnMO, appointed after a competitive tendering process. EnMO is a joint venture between ESIS (a wholly owned subsidiary of the National Grid Company) and Alta, a US energy trading company. The new market will be used by Transco, in its role as residual gas balancer, to acquire or dispose of volumes to balance the system on the day. The new mechanism is intended to reduce the overall costs of balancing and to eliminate unwarranted price volatility at times, which had been a much criticized feature of the flexibility mechanism. The OCM can be used also by gas shippers to fine-tune their positions within the day.

The new arrangements have also created commercial incentives for Transco to maximize the availability of capacity in the NTS by introducing a more efficient and non-discriminatory method of auctioning available firm entry rights into the NTS. These are now related to actual physical capacity, so removing 'gaming' possibilities.

For further information on this topic please contact Henry Davey at Herbert Smith by telephone (+44 20 7374 8000) or by fax (+44 20 7374 0888) or by e-mail (Henry.Davey@herbertsmith.com).
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