Industry Dialogue on xoserve Services

1
Industry Dialogue on xoserve Services

• 14th September 2007

2
Five Key Areas Covered by Workgroup

• Features of xoserves Systems
• Cost Requirements
• xoserve Funding Arrangements
• Service Standards
• Governance

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Conclusions Recommendations

• UK Link Replacement
• Shippers considered that they would not be in a
  position to assess the reasonableness of costs
• Fund the high level features as agreed by the
  workgroup via traditional price control
  allowances, efficient costs established by Ofgem
• Undertake more extensive consultation prior to
  2010
• Utilise a mechanism for funding any agreed
  additional regime changes

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Conclusions Recommendations

• Ongoing Change
• Recognised importance of funding ongoing change
  so that barriers are not created to the further
  development of the commercial regime
• If transporters are not allowed revenue at the
  start of the price control period, then a
  mechanism is required to recover incremental
  costs from users
• Standards of Service
• No change proposed

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Conclusions Recommendations

• User Pays Services
• Workgroup developed a more detailed understanding
  of the governance and charging framework
  required, however recognised that significant
  additional development work will be required
• Concerns that additional complexity and cost of
  introducing transaction charges may outweigh the
  benefits
• Workgroup recommended an impact assessment
  accompanies any proposal to introduce user pays
  charges

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What Has Happened Since Then?

• UK Link Replacement
• Meetings planned for later this year
• Ongoing Change
• Little progress
• User Pays Services
• Ofgem requested information to feed into an
  impact assessment
• GDPCR Initial Proposals published
• Ofgem requested service line cost information
  from transporters/xoserve as part of PCR process
• Draft changes to GT licence conditions
• Further thoughts on framework

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User Pays for Existing Services

• Key Features of GT Licence Changes
• Charges derived from user pays services will be
  treated as excluded revenues
• A joint Agency Charging Statement, detailing the
  methodology for deriving user pays charges, the
  charges and the scope of core services and user
  pays services
• Ofgem will have the right to not approve the
  charging statement
• Charges should, as far as reasonably practicable,
  reflect the costs in providing the service and
  shall not unduly discriminate
• The licence drafting will develop once there is
  further visibility of the proposals

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Framework
Obligations to Service Provision Service Provided
on Behalf Flow of Revenue
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Other Considerations

• Users would generally be shippers, but could also
  be other parties, eg MAMs, end users,
  Energywatch, traders
• No changes planned to the services delivered
• At commencement of regime, user pays services
  will be broadly similar for all users requiring
  the service
• Where the nature of user pays services are
  defined in existing governance regimes, they
  could remain within those regimes
• Existing arrangements for users to obtain bespoke
  services will continue

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User Pays Services

• Provision of Information
• Reporting
• User Admission
• Must Reads
• AQ Amendments Appeals
• Shipper Agreed Reads

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What Needs to be Put in Place?

• Refinement of Framework
• Confirmation of Service Lines
• Transporter Licence Conditions
• UNC Modification
• Agency Charging Statement
• Contracts between xoserve and users
• Invoicing and Cash Collection Processes

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Draft High Level Timeline
SEP
OCT
NOV
DEC
JAN 08
FEB
MAR
APR
MAY
User Pays Implementation Discussions
28 days
Joint Agency Charging Statement Publication
Agency Framework Agreement Draft
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Agency Change Funding Model
Further Relevant Objectives ?
Degree to Which Furthers Relevant Objectives and
Doesnt Meet User Pays Criteria ?
To some extent
Fully
GT Pay (Class 2)
MOD
GT Users Share Costs (Class 3 2 Mixed)
No
Partial
Change
No MOD
Report and Share Benefit
User pays if wanted
Yes
Use Assets for Regulated Services?
xoserve
No
Continue
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Next Steps Proposal

• Establish an implementation group with two key
  objectives
• Implementation of user pays for a limited set of
  existing Agency services, to operate from 1st
  April 2008.
• Development of a proposal for the application of
  user pays to ongoing change. To be completed by
  31st March 2008.