PARCA: Contractual Overview

TX Workgroup

27th February 2013

Steve Pownall

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Purpose of today…

Is to provide an overview of PARCA contract as follows:

Pre-PARCA Assessment (proforma)

PARCA Phased ‘Works’

Provision of capacity inc ‘fine tuning’

Customer fees and financial commitment

Information provision

Demonstration Data

Milestone Information

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…but before we commence..

Going forward, for the purposes of the proposed ‘PARCA’ contract /arrangements ONLY, we intend to use a simplified naming convention:

Was Will become Works

Stage 1a Phase 1 Needs Case/Technical Options

Stage 1b Phase 2, Schedule A Strategic Options

Stage 2 Phase 2, Schedule B Outline routing & siting

Stage 3 Phase 2, Schedule C Detailed routing & siting / EIA

Stage 4 Phase 2, Schedule D Proposed DCO Application

Stage 5 Phase 2, Schedule E Submit DCO Application / hearings

Stage 6 Phase 2, Schedule F Secretary of State decision

Note: ‘Local Planning’ Works will be under Phase 2, Schedule G (to be defined)

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Pre-PARCA Assessment

Customer to provide the following information to National Grid:

Details of customer

Proposed project location including facility site and NTS connection site

Indicative capacity requirement (profiled if appropriate)

Indicative capacity upper/lower range – for ‘fine tuning’ purposes only

For DNO Users; Pressure and Flex requirements Used to populate the PARCA data items prior to signature by both

parties

We anticipate dialogue between the customer and National Grid prior to the submission of this information

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PARCA Phased Works - Overview (1)

The PARCA Works will be contained within two Phases

Phase 1 - Needs Case & Technical Options

Where no NTS reinforcement is required the PARCA becomes primarily a customer ‘Demonstration Data’ contract up to point of capacity allocation

Phase 2 - Statutory Planning Works either:

National planning (Planning Act 2008) for Development Consent Order

Schedules A - F (please see below)

Or:

Local planning

Schedule G [to be defined]

Note: Where we identify NTS reinforcement that requires planning, this could be met through either build or through non-build alternatives e.g. commercial contract or a combination of both. We anticipate that a proportion of the Phase 2 Statutory Planning Works will still need to be carried out under an alternative to a full-build option.

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PARCA Phased Works - Overview (2)

Two natural ‘customer’ breakpoints

Following output from Phase 1

Customer to indicate whether it wishes to progress to Phase 2 - if NG indicates a Needs Case for NTS reinforcement

Where no NTS reinforcement is identified the customer will be required to pay a reservation fee; or the customer may bid through the capacity auction process

Phase 2 - following Secretary of State (or local authority) decision on our planning application

Customer may terminate PARCA Works at any time but liable for costs incurred (and committed) up to the point of termination

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PARCA Phase 1 Works: Establish Needs Case and Technical Options

Phase 1 Establish the Need Case and Identify Technical Options

Up to 6 Months

Establish and Document the Project Need Case for physical works

Identification potential strategic options

Apply technical filter

Apply benefits filter

Prepare Technical Options Report (& customer summary)- internal challenge & review, including legal counsel

Milestone Information: Provide the customer with a ‘Phase 1 Works Report’ based on Needs Case outcome/Technical Options (if relevant)

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PARCA Phase 2 Works: Schedule A – Strategic Options works

Phase 2Schedule A

Develop Strategic Options Report (SOR)

Up to 6 Months

Engage external resource (Environmental Consultants, Engineering consultants, Communications) to assist with Options Appraisal and SOR

Engage with external stakeholders:- seek comments on strategic options being considered, including reasons for options discounted at technical and benefit filter.- agreement for OA topics scoped in and out

Prepare Draft Strategic Options Report (SOR):- undertake Level 1 Options Appraisal using environmental consultants- internal challenge & review, including legal counsel

Consult on Draft Strategic Options Report (SOR):- engage and consult with key stakeholders (workshops & presentations)- review & incorporate stakeholder comments

Compile Final Revision of SOR - Including Recommendation

Milestone Information: Provide the customer with an Project Update including SOR (recommendation), reconfirm NG project plan timescales

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PARCA Phase 2 Works: Schedule B – Outline Routing and Siting works

Phase 2Schedule B

OUTLINE ROUTING AND SITINGIdentify Preferred Route Corridor / Siting Studies

Up to 15 Months

Develop SOCC (Statement of Community Consultation)

Undertake RCIS (Route Corridor Investigation Study)

Undertake Options Appraisal Level 2

Public Consultation on Route Corridors and Options Appraisal Level 2

Review of Public Consultation

Identify Preferred Route Corridor:- prepare final Route Corridor Study and Level 2 Options Appraisal & Route Corridor Feedback Report

Milestone Information: Provide the customer with an Project Update including Preferred Route Corridor/Siting Study report; reconfirm NG project plan timescales

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PARCA Phase 2 Works: Schedule C – Detailed Routing & Siting works

Phase 2Schedule C

DETAILED ROUTING / SITINGUndertake EIA (Environmental Impact Assessment) & Design Pipeline

Up to 24 Months

Identification of route alignments, involving thematic groups, community forums & routeing / siting workshops

Undertake Options Appraisal (Level 3) and EIA (Environmental Impact Assessment)

Undertake Pipeline Detailed Design to support:- Options Appraisal Level 3- EIA on preferred pipeline alignment and AGI site

Compile ES & Documents for Submission to NID (National Infrastructure Directorate) within the Planning Inspectorate

Milestone Information: Provide the customer with an Project Update including Detailed Routing/Siting report, EIA outcome; reconfirm NG project plan timescales

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PARCA Phase 2 Works:Schedules D, E and F

Phase 2Schedule D

PROPOSED DEVELOPMENT CONSENT ORDER (DCO) APPLICATIONFormal consultation, finalising project, preparation of application documentation

Up to 6 Months

Formal consultation on project, in accordance with agreed SOCC

Review feedback & adjust / finalise project

Finalise: - land rights offers- DCO documentation, including legal counsel review

Phase 2Schedules

E & F

DCO APPLICATION AND HEARINGSPlanning Act Submission, Examination and Approval Process

Up to 15 Months

Submit Application to NID (National Infrastructure Directorate) within the Planning Inspectorate, NID validates application, register and publish

Consideration of application by Commissioners (written representations or public hearing)

NID report and recommendation to Secretary of State

Decision from the Secretary of State for Energy and Climate Change

Milestone Information: Provide customer with update ‘report’, reconfirm NG Project Plan timescales, as necessary for each schedule

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Provision of Capacity timeline (1)

Effective Date (ED):

At which the customer and National Grid sign the PARCA

From which National Grid agrees to undertake Phase 1 Works – will require the customer to pay the fee prior to commencement of the Works

Reservation Date (RsD):

The customer will have its capacity requirement reserved

Allocation Date (AD):

The customer (where not a User) must have nominated one (or more) User(s) up to 1 month prior to this date

The default date that is between 24 and 35 months prior to the Registration Date

Registration Date (RgD):

Date from which the User holds the capacity

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Provision of Capacity timeline (2)

RsD

• Capacity allocated to the User• NPV (entry only)

RgD AD

PARCA: Phase 1 Works

Price NPV (entry only) Quantity (& range) reservation fee or security due Capacity ‘tagged’ in Gemini from this date and no longer forms part of unsold.

Date PARCA signed by the customer and National Grid

Default Allocation Date is between 24 and 35 months prior to the RgD

Nominate user up to 1 month before AD

Reservation Date (RsD)

Allocation Date (AD) Registration Date (RgD)

Date from which the User holds the capacity

Effective Date (ED)

ED

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Provision of Capacity & ‘fine tuning’

Fine tuning of customer’s capacity requirement:

Customers have requested the flexibility to ‘fine tune’ their capacity requirement prior to the capacity Allocation Date

As a project progresses, a customer will have more certainty as to its ‘final’ capacity requirement: linked to a number of factors e.g. chosen turbine manufacturer

We understand that capacity fine-tuning is an important customer consideration

Fine tuning will be allowed within an agreed upper and lower range

Pre-PARCA Assessment proforma

We will require the customer to provide demonstration data to support its request to fine tune its capacity requirement

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Customer fees and financial commitment (1)

PARCA Phase 1 (Needs Case and Technical Options) Fee

Customer will fully fund the PARCA Phase 1 Works: fee approx £120,000 ~ £150,000 – similar principles to 0373 NTS Connection (excluded service, cost pass through)

Fee reconciled against outturn costs with ££ difference refunded to, or recovered from, the customer

PARCA Phase 2 (Statutory Planning Works) - securitisation

Where Phase 1 Works identifies either:

Requirement for physical NTS reinforcement and, Local or National planning consent is required or;

Use of a commercial contract can be utilised to meet the customer’s capacity requirement then:

The customer will securitise 100% of the proposed Pre-Capacity Allocation Revenue Driver (see last TX Workgroup PARCA Funding presentation for details)

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Customer fees and financial commitment (2)

Capacity Reservation Fee

This could be applied following the completion of PARCA Phase 1 Works, where the customer’s capacity requirement will be met entirely through existing system capability

In this scenario, the customer may secure its capacity requirement either by bidding in the capacity auction or by reserving through the PARCA

The Capacity Reservation Fee could be calculated:

Following PARCA Phase 1 Works and customer agreeing that it wishes to progress its project

The Capacity Reservation Fee will be calculated based on (to be discussed in March TX Workgroup)

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Post Capacity Allocation RD

triggered

RD* added to Allowed

Revenue and charged to industry via

Transportation Charges

Pre-Capacity Allocation Revenue Driver triggered and profiled over 4 years

PARCA Funding (revised for ‘Phases’) Proposal for a Planning Act 2008 project

Phase 1Works

Phase 2 Works

NTS Investment: Project Needs

Case / Technical Options

NTS Reinforcement (or other commercial method) required

All costs charged to PARCA Signatory

Classified as 100% Excluded Services – no

impact on Allowed Revenue

Invoiced up front and reconciled

Pre Capacity Allocation Revenue

Driver triggered

RD* added to Allowed Revenue and charged to

industry via Transportation

Charges.

PARCA Signatory securitises value of

RD

*Value of RD’s are reconciled with actual costs, reconciliations through Transportation charges.

Strategic OptionsSchedule A

X

X

Post-Capacity Allocation RD triggered & profiled over 3 yrs

Pre Capacity Revenue Driver runs up to DCO

X

XPost-Capacity Allocation Revenue Driver calc’d

during Phase 2 Appendix 3

Fu

nd

ing

/ C

har

gin

gP

AR

CA

Ph

as

e

Pre-Capacity Allocation Revenue Driver

calculated by end of Phase 1

Outline Routing & siting

Schedule B

Detailed EIARouting & siting

Schedule C

Proposed DCO Application

Schedule D

DCO Application and hearingsSchedule E

DCO submission & SoS decision

Schedule F

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Information Provision

Demonstration Data (from customer)

Please see overview…

Most categories seem to be required towards the end of the PARCA process e.g. Phase 2, Schedules E, F

We would appreciate views (please!) from all categories of our customers e.g. entry, storage and exit as to whether there might be additional items

PARCA Phased Works – Milestone Information (from National Grid)

Please see overview…

The proposed categories of information that customers will receive from National Grid are aligned to the PARCA Phased Works and associated milestones

Is there any other additional information that customers might wish to see from National Grid?

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And finally…

Do you have any further questions, comments?