Ofgem recently published a consultation document on initial proposals for LNG storage price control. The document is the second in a series of three regarding the price control of LNG storage facilities, and it contains respondents’ views on the form, scope and duration of the control and Ofgem’s initial proposals on the recommended way forward.

Background

National Grid Gas (NGG) owns four LNG storage facilities which provide competitive storage services to shippers, as well as monopoly services to NGG’s Transmission System Operator (TSO) and the Scotia Gas Network’s Scottish Independent Undertakings (SIUs) which are separate distribution networks for four remote Scottish towns. The services provided to the TSO and the SIUs are currently subject to price controls which expire on 30 April 2008. The consultation document sets out Ofgem’s recommended approach to the extension of regulatory control going forward until sufficient competition has been established, the overriding goal being to establish a competitive market for the provision of these services.

Ofgem’s views

  • Ofgem proposes continuing with a price cap for the provision of services by NGG LNG to the TSO and the SIUs.
    • Ofgem maintains the view that the services can be provided by third parties by April 2009, although respondents to the initial consultation document questioned the feasibility of the timescale.
    • The subject of decommissioning costs associated with the LNG storage facilities divided respondents, but Ofgem has reiterated that they should be excluded from the new control as, in their view, they are for NGG to bear, not consumers.
    • The document also sets out Ofgem’s views on the determination of NGG LNG’s costs for the purpose of setting the price caps, as well as the treatment of various cost and revenue information submitted by NGG LNG and the price review calculations.

    Next steps

    The deadline for responses to the consultation document is 23 November 2007. Thereafter, Ofgem intends to publish its decision document in the middle of December 2007.

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    The original publication date for this article was 08/11/2007.