Is your gas capacity level correct?

Is your gas capacity level correct?

With the introduction of Project Nexus in June 2017, businesses with Daily Metered (DM) gas sites gained a greater opportunity to lower their energy costs.

Previously, Daily Metered (DM) gas sites could only change their gas capacity once a year between October and January. However, due to a modification (officially known in the industry as UNC 445) DM businesses can change their gas capacity as many times as they like within this period, which provides greater opportunities to reduce energy costs.

What does this mean for your business?

This modification allows businesses to reduce their Daily Metered Supply Offtake Quantity (DMSOQ) in the Capacity Reduction Period between October and January on more than one occasion. By monitoring your maximum daily energy use it is possible to avoid exceeding the DMSOQ limit and paying excessive penalties.

What is my SOQ?

Supply Offtake Quantity (or SOQ, for short) is your agreed gas capacity level, in other words it is the maximum daily gas consumption of your supply point. This is agreed between you and your gas supplier.

Does this mean you can now change capacity level at any time throughout the year?

No – you can only change your capacity level (or DMSOQ) in the winter period between October and January. Previously, the system didn’t allow customers to respond to changing patterns of their energy usage in a timely manner, which could result in them paying charges for capacity that didn’t reflect their (lower) use of the gas network. Due to the modification there is now no limit to the number of times DM sites can change their capacity level during the winter period. However, if your capacity is reduced and then increased again within the winter period, a Capacity Reconciliation Charge is applied.

How easy is it to increase the SOQ in future?

DM sites are able to change their capacity levels as many times as they like during the winter period. However, the industry changes do not apply to non-DM sites. If you wish to review your DMSOQs you need to contact your supplier.

What happens if the SOQ is breached?

During the winter period (October to January) DM sites face a ratchet penalty charge if their usage exceeds the agreed DMSOQ level. The charge is designed to prevent parties from setting their capacity requirements too low in order to cut their standard capacity charges. Incorrect information from consumers can result in a lack of accurate information regarding how much gas may be needed by the grid when energy demand is at its highest, or if more investment is needed to provide system security.

The size of the penalties vary depending on the scale of difference between actual peak consumption and that in the contracted DMSOQ. If the agreed capacity is breached, then DMSOQ is automatically recalculated – or ratcheted – and applied on the system from the following day. This continues until a maximum cap is reached, the Provisional Maximum Supply Point Capacity (PMSOQ). If the PMSOQ is breached only the largest ratchet within the month shall be charged.

gas capacity

When the Users Daily Quantity Off-taken (UDNO) exceeds the required DMSOQ level, the difference is used to calculate the ratchet charge. The charges are calculated by multiplying the ratchet amount by two-times the applicable annual rates for the LDZ Capacity Charge and the Customer Charge.

The larger the error, the larger the penalty.

Stay informed with Utilitywise

If you have any questions about gas capacity charges call us on 01527 511 757 or email our Market Intelligence team.

Our Market Intelligence team keep a close eye on the energy markets and industry updates, keeping our clients informed at a frequency to suit them. Visit our website to find out more about Utilitywise Market Intelligence.

Ross Moffat

Posted by on Tuesday, the 23. January at 12.02

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.