LDZ Shrinkage
- a National Grid Overview
Chris Warner
Mod 0194/RG 0208
June 2008
Topic areas
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LDZ Shrinkage
What is LDZ Shrinkage?
Own Use Gas and Theft of Gas
Leakage
National Leakage Tests
UNC Section N Timeline
Shrinkage Forum
2007/08 Shrinkage Factors
Modification Proposal 0203V
Gas Prices
2008-13 Shrinkage Allowances (E8)
2008-13 Environment Emissions Incentive (E9)
LDZ Shrinkage
Introduction
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What is LDZ Shrinkage?
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For the purposes of UNC, LDZ Shrinkage comprises of
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“For the purposes of the Code shrinkage means gas in a System which is
used by the Transporter in connection with the operation of, or which is
unaccounted for as offtaken from, a System”
own use gas: gas used in running compressors, and gas used for
preheating
unaccounted for gas: gas lost or unaccounted for by reason of unidentified
theft, error in meter correction and leakage, including gas vented in its
operation
2007/08 Procurement Context*
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1,904 GWh
0.6% LDZ throughput
£26.6m
* National Grid Networks only
Chart for
illustration only,
not to scale
What is LDZ Shrinkage?
Key Components
Total LDZ Shrinkage
Own Use Gas
2% of 2007/08
Shrinkage
Holder Preheat
Leakage
95% of 2007/08
Shrinkage
Pre-heat
Gas
Distribution
Mains and
Service
Leakage
Low
Pressure
Broken
Mains
Medium
Pressure
Holder
Stations
Theft of Gas
3% of 2007/08
Shrinkage
Above
Ground
Installation
Leakage
Purging
NTS / LTS /
<7bar PRS
Service
Governors
Venting
Equipment
vented for
maintenance
Transporter
responsible
Theft
Equipment
that vents in
use
Supplier
responsible
Theft
What is LDZ Shrinkage?
UNC Definitions
Total LDZ Shrinkage
Own Use Gas
2% of 2007/08
Shrinkage
Holder Preheat
Leakage
95% of 2007/08
Shrinkage
Pre-heat
Gas
“own use gas”
Distribution
Mains and
Service
Leakage
Low
Pressure
Above
Ground
Installation
Leakage
Broken
Mains
Medium
Pressure
Holder
Stations
NTS / LTS /
<7bar PRS
Theft of Gas
3% of 2007/08
Shrinkage
Purging
Venting
Transporter
responsible
Theft
“unaccounted for gas”
Service
Governors
Equipment
vented for
maintenance
Equipment
that vents in
use
Supplier
responsible
Theft
Own Use Gas and Theft of Gas
Contributes to only 5% of LDZ Shrinkage Requirements
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Own Use Gas
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Calculated via model as opposed to being measured
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Historically no requirement to meter sites
Complex model uses actual telemetered regulator throughput,
temperature & pressure data, where available
New updated model first used in 2005/06
Theft of Gas
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Negotiated proportion of LDZ Throughput
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Instances of Theft assumed to be 0.3% of LDZ throughput, of which
10% of the total theft was transporter responsibility (i.e. 0.03% of LDZ
throughput)
Transporters however believe that only 3.1% is transporter
responsibility (i.e. 0.01% of LDZ throughput) based on confirmed
occurrences of theft from xoserve
Theft upstream of ECV proven to be difficult to identify so currently
agreed to be 0.02% of LDZ throughput
Leakage
Contributes to 95% of LDZ Shrinkage Requirements
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Majority of leakage relates to Low Pressure (81%)
Predefined leakage rates:
11 mains leakage rates and 4 service leakage rates
 2002/03 National Leakage Test
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10.9%
0.4%
7.6%
16.2%
64.9%
LP Mains Leakage
LP Service Leakage
AGI Leakage
Interference Damage
MP Mains Leakage
Low Pressure Leakage
Components:
 Mains Asset
Statistics
 Average System
Pressure
 Monoethyleneglycol
(or MEG!)
 Number of Services
National Leakage Tests
2002/03 Advantica test programme
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In 1992, British Gas commissioned a programme of leakage tests to
quantify the leakage from its distribution system
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Transco commissioned Advantica to carry out a new programme of
tests as a result of the disallowance
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Leakage rate data used to facilitate Shrinkage Factor Negotiations
Shippers requested disallowance of proposed LDZ Shrinkage Factors in
2001/02 due to out-of-date leakage rate data
2002/03 National Leakage Test (NLT) programme
A total of 862 tests were carried out in the period from February 2002 to May
2003, providing 849 usable results
The results of the NLT programme were presented to the Shrinkage
Forum in June 2003
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Leakage Rates were lower than those determined in the previous 1992 test
programme
Concluded to be as a result of Transco’s mains replacement programme,
which tended to target poor condition mains
For the Low Pressure system, this resulted in an overall reduction of
approximately 31%. For the Medium Pressure system, the overall reduction
came out at less than 1%
UNC Section N Timeline
Establishment of Gas Year LDZ Shrinkage Volume
April, May &
early June
Analysis carried
out to support
initial Shrinkage
proposals
Apr
May
1 July
Submit estimated
LDZ Shrinkage /
methodology to
Users
“Initial Proposals”
Jun
Jul
1 – 15 August
DNs to consider User
representations and
may convene
meeting if deemed
appropriate
Aug
Sep
1 – 15 September
Users may request a
disallowance
Late September
Issue instructions to
load new shrinkage
requirements into
Gemini
Oct
Nov
Dec
Gas Year….
Late June / early July
Opportunity to present
estimated Shrinkage to
Shrinkage Forum
1 July – 1 August
Users may submit
representations in
respect of the
estimated Shrinkage
15 September – 1 October
Possible Ofgem
Determination Process
1 September
Submit final estimated
LDZ Shrinkage /
methodology to Users
“Final Proposals”
Jan
Shrinkage Forum
Industry Discussion Forum
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Provides an opportunity for Transporters to meet
interested parties in order to discuss LDZ
Shrinkage issues such as:
 Shrinkage
Factor Proposals
 Assessment & Adjustment Report
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Joint Office provides administrative support
 Chair:
Tim Davis chairs the meeting
 Secretary: Lorna Dupont is the Secretary
2007/08 Shrinkage Factors
April 2007 to March 2008
LDZ
 EA
 EM
 NT
 NW
 WM
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UNC Factors
0.593% / 0.620%
0.519% / 0.510%
0.622% / 0.550%
0.656% / 0.630%
0.729% / 0.730%
N.B.
 UNC Factors – Gas Year
 Licence Factors – Formula Year
Licence Factors
0.593%
0.519%
0.622%
0.656%
0.729%
Modification Proposal 0203V
Areas being addressed
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For the 2008-13 Gas Distribution Networks Price Control, Ofgem fixed a
volumetric allowance for Shrinkage for each LDZ, as opposed to ex
ante target shrinkage factors (percentages of throughput).
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As a result, changes to Section N have been progressed:
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Ofgem concluded that on the basis of evidence available, there is little
correlation between shrinkage and throughput for the existing networks
to update references to LDZ Shrinkage Factors to reflect LDZ Shrinkage
Quantities
make appropriate amendments to the content of industry notification
processes, namely current Initial and Final Proposals
effect minor change to the classification of LDZ vented gas, consistent with
the operation of the approved Leakage model calculations (vented gas is
not burnt and therefore should be classed as unaccounted for gas, not own
use gas)
update the sources of information used in the assessment process to
include all inputs to the leakage model
System amendments (Gemini / UK Link) being considered and progressed
in parallel
Modification currently with Ofgem for determination
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Preferred implementation date 1 July 2008
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Gas Prices
Day-Ahead Price Trend
Day-Ahead Price Analysis (p/therm)
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140
120
100
80
60
40
20
0
?
Day-Ahead Price
Summer Average
Winter Average
2008-13 Shrinkage Allowances (E8)
Revised Regulatory Regime Introduced
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Shrinkage is gas lost from the system through leakage, theft and own use
gas
Concluded there was no measurable correlation between shrinkage
(leakage) and throughput
2007/08 allowances (volume & price) ‘rolled over’ for first six months to
allow UNC modification proposals to be progressed
Revised regime reduces both (weather related) volume risk and price risk
2007/08 Shrinkage Allowance
2008-13 Shrinkage Allowance
Shrinkage Factors
Shrinkage Quantities
(predefined within licence)
(predefined ‘reducing’ volumes within
licence, broadly reflective of BPQ
submission)
multiplied by
actual throughput
multiplied by
Gas Reference Price
(3 month ahead price * 3.5% uplift)
multiplied by
Gas Reference Price
(Day Ahead Price)
2008-13 Shrinkage Allowances (E8)
Allowed Shrinkage Quantities
2008-13 Environment Emissions Incentive (E9)
Dx mains leakage significant source of greenhouse gas emissions
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Additional incentive, over and above mains replacement
programme, to reduce leakage based on social cost of
carbon
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Average of £29.7 per MWh over the period
Cap / Collar at 10% of baseline leakage volumes