Ofgem suggests 11% cut on Avonmouth regulated LNG storage prices
British energy regulator Ofgem has suggested an 11% decrease on the current price for regulated services provided by the Avonmouth short-range LNG storage facility in southwest England.
In a proposals document published on Monday, Ofgem said that it will assume that National Grid LNG - the facility's owner - will continue to receive revenues from commercial services until 2018.(see ESGM 26 September 2012).
National Grid LNG provides a combination of commercial services to natural gas shippers and regulated services to both National Grid Gas (NGG) and Scotia Gas Networks (SGN). The price of commercial services is market-based. The regulated services are designed to help NGG to balance the gas transmission system and to SGN for supplying LNG through tankers to four towns in Scotland that are not connected to the distribution networks, according to Ofgem. The regulated services are provided at prices set out in Special Licence Condition C3 of NGG's gas transporter's licence ("C3 prices").
Both NGG and SGN had said they need to continue using Avonmonth's regulated services until 2018, which prompted Ofgem to review the C3 prices, as the current prices are due to expire on 30 April 2013.
"The proposed change is a decrease of 11% compared with the current C3 price," Ofgem said. According to Ofgem, the price regulation is intended to protect consumers because SGN - the company to which LNG from the facility is supplied - has "no current alternative" to using Avonmouth.
"We will be setting a five year duration for the control, which will take funding for Avonmouth to 30 April 2018, on the assumption that both NGG and SGN will continue to rely on Avonmouth for regulated services until April 2018," Ofgem said.
Last reviewed in 2011 - and originally intended for the Partington, Glenmavis and Avonmouth facilities - the C3 prices were only retained for Partington and Avonmouth, as operational problems developed at Glenmavis during the review process.
Subsequently, in a time of great uncertainty for short-range storage facilities, Partington and Glenmavis were confirmed closed in June.
Before the closures of Glenmavis and Partington, National Grid conceded that its LNG facilities were no longer economical (see ESGM 27 August 2010).
Ofgem said that it is seeking responses to its initial proposals by 4 January 2013, and will subsequently publish its final proposals in February 2013. JCE
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