British Regulator Proposes Lower Grid Allowance

Britain's energy regulator Ofgem wants to cut National Grid’s allowance for its 2013-2021 gas transmission price control by £277.5mn. This is due to a specific project being shelved rather than an overall cut in its budget.

The funding relates to providing capacity for putting gas into the national high-pressure gas pipeline at the Fleetwood entry point in Lancashire, it said March 31. National Grid would have had to provide 650 GWh/d. 

"National Grid Gas Transmission’s (NGGT) obligation to provide this capacity was originally triggered by a gas shipper which bid for the capacity in an auction. However, the shipper has since defaulted on payments and no longer has a right to the capacity. We are proposing to reduce NGGT’s allowance otherwise customers will be charged for investment that has not been delivered," the regulator said. The shipper had bid for 350 GWh/d capacity, and for just one quarter of one year: 2025.

Ofgem is also consulting on removing National Grid’s obligation to provide capacity at Fleetwood. This means that any gas shipper that wants to buy capacity there in future would have to purchase a minimum amount in one of the regular auctions that National Grid runs. This means that consumers would be better protected against the risk of paying for expensive network investment which is not needed.

Ofgem will make a final decision on the funding allowances, and on NGGT’s capacity obligation this summer.

The shipper, Canatxx – later trading as Halite Energy – had planned to build a salt cavern gas storage site at Preesall in Lancashire, which would have needed an offtake/entry point to the national grid.

It would have been Britain's largest onshore facility. But falling gas demand and alternative sources of peak gas supply, notably LNG, made the project uneconomic.

William Powell