Utility Week

8 | 22ND - 28TH JUNE 2018 | UTILITY WEEK Policy & Regulation the NDM demand projections respond to different weather conditions. To estimate the daily demand for a supply point, its yearly consumption is first divided by the number of days in the year to give a daily average. This is then scaled up or down according to an annual load profile (ALP). A further scaling is applied using a daily adjustment factor (DAF) representing the sensitivity of the supply point to weather, and a weather correction factor, representing the conditions on that day. Supply points are assigned to a customer profile called an end user category, each with an accompanying ALP and DAF. Blackett says the customer profiles group too many different supply points together, failing to distinguish crucial differences in their responses to weather. Some small commercial customers, for example, are in the same category as residential customers, despite having a much more muted response to cold snaps. Blackett says the result is that "when it's cold the allocation doesn't go up enough and when its warm it doesn't go down enough". She cites as evidence the estimates of unidentified gas over recent months: "Unidentified gas was massively positive in February and March when we had the really cold period, and last month when it was warm it was quite negative." Accordingly, Eon and others have proposed a ra of additional code modifications to try and stop this happening. UNC644 (Eon) would create multiple new end user categories by splitting apart some of the existing ones, while UNC659 (Eon) would enhance the composite weather variable. Several of the modifications attempt to address the lack of adequate information needed to establish accurate customer profiles and scaling factors. And Ofgem also has its eye on the issue. One of the proposed remedies in its minded-to decision was an increase in the size of the data samples used to formulate these profiles. Changing course Cornwall Insight senior analyst Steven Brit- ton believes these modifications move in the right direction. "All of these are going to increase the accuracy. They're going to pro- vide much more information to work with," he says. "The only thing that is regrettable is that they couldn't have been done sooner." Britton says the modifications Ofgem rejected were raised in haste, although the urgency was understandable: "We have a lot more information now. The issue is understood a lot better". Although some shippers would still like to return to the old way of doing things, most accept they have lost the battle and are getting on board with the new approach to resolving the issue. Britton says the new modifications should reduce the volatility in the daily estimates for unidentified gas, the main thorn in the side of shippers or suppliers. But, like Blackett, he says the industry should not labour under the illusion that these changes are a sure-fire way of returning the overall volume to the pre-Nexus level. It needs to start looking at the. "I think that's what Ofgem was also wary about, because the the part does not get discussed a lot in the industry," he says. On a separate note, he adds the regulator is also concerned about shippers passing on increased costs to suppliers, and hence consumers. "What it is really worried about is that shippers will pass on these costs in the short term, and then in the long term, as costs flow back to them through the rolling reconciliation process, they will not then pass those credits on to customers as they did the costs, resulting in them having made a windfall," he explains. The longer it takes to reduce the volatility in unidentified gas estimates, the bigger this problem will become. Speeding things up It should be reassuring, then, that yet more proposals have been made to try and expedite progress. UNC658 (Total) would provide Xoserve with the resources to investigate the unidentified gas issue and come up with solutions. Xoserve has itself asked for this to happen through a change to its data services contract. They are warmly welcomed by Blackett: "Hopefully, giving Xoserve some money and saying 'get in some smart cookies to do some modelling and work out what this needs to look like' will make things change faster." She says Eon, as indicated by the number of code modifications it has submitted, has been doing a lot of heavy liing up until this point, describing the process as "phenomenally frustrating" and "a hard slog". Xoserve, she believes, is much better placed to examine the issue. Eon's modelling has either been based on aggregated data that is not sufficiently granular, or data from its own portfolio which, while large, may not be representative. Xoserve will have access to a much deeper pool of information. Britton again agrees: "It's one those things where you think, why didn't the industry think of that six months ago". Aer exhibiting something of a kneejerk reaction, the industry now appears to be heading down the right path. The new arrangements may have had bumpy landing, but turning back the clock to the pre-Nexus days is not the answer. It's certainly hard to imagine Ofgem ever giving its blessing to such a reversal, given its long-running efforts to improve the accuracy of billing and metering. The race is now on to improve the demand projections, so the industry can put an end to the volatility which has caused so much trouble as soon as possible. Only then it will be finally able to turn its attention to reducing the huge amount of gas that goes missing from the networks every day, ultimately at a cost to consumers. LATEST UIG VOLATILITY Source: Xoserve 20% 15% 10% 5% 0% -5% -10% -15% -20% 1 October 2017 03 June 2018 UIB % by gas day (D+1 vs D+5) - 13 LDZs + 1 =5 "When it's cold the allocation doesn't go up enough and when its warm it doesn't go down enough." SALLYANN BLACKETT, HEAD OF VOLUME FORECASTING AT EON,

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