Interconnector UK Seeks Capacity Code Change
Interconnector UK, the operator of the bi-directional line between Bacton in the UK and Zeebrugge in Belgium, is lobbying to change the network code that governs capacity allocation so that it can sell its services with greater flexibility, CEO Sean Waring told NGW April 5. Another hope is that with Brexit, the UK might no longer be bound by that network code and be free to market its capacity as it chose, he said.
The long-term capacity contracts that financed the line expire September 30, 2018, after 20 years. The company has sold only about 14% of its capacity into the UK after that point, which was an extension of an earlier contract; and none in the opposite direction, so about a 7% of its capacity in all. The next capacity sale will not be until July 2018, according to the rules. "That is ridiculous," Waring said.
The pipeline's owners will have to decide what to do with the pipeline if it cannot sell more from October 2018. Short term capacity can be picked up free and the industry is used to sunk costs, he said. Keeping the line operational costs money even if no gas flows through it.
The company came up with a plan last year to offer seasonality whereby shippers could buy an annual amount but offer it back to the operator as required. But energy regulators, who have to interpret the codes which ultimately come from the European Commission, deemed this to be in breach of the capacity allocation network code, Waring said.
IUK CEO Sean Waring (Photo credit: Waring/LinkedIn)
Unlike other transmission system operators, IUK and its Dutch equivalent, the Balgzand-Bacton Line (BBL) are considered as merchants and they do not have a regulated rate of return. But they are also unable to act outside the network codes, and have to compete with other forms of flexibility.
Last summer saw record flows to the continent through the pipeline, with the UK Rough reducing injections. When the line was full in September and no more arbitrage existed, the UK National Balancing Point was 8 pence/therm lower than its Belgian counterpart; and Q4 2016 saw the highest flows to the UK ever for a three-month period.
Gas cannot flow two ways through Interconnector UK at any one time: its technical capacity is up to 25.5bn m³/yr from Belgium into the UK (at Bacton), or up to 20bn m³/yr from the UK into Belgium (at Zeebrugge).
William Powell