13th November 2017 | Posted by: Daniel Birkett | Industry News

The gas industry is looking to tackle the current price volatility before it impacts consumers.

Urgent action is to be taken by the gas industry to resolve price volatility which could be passed on to consumers if allowed to continue. Following the implementation of the new settlement system, Project Nexus in June 2017, the new balancing factor (Unidentified Gas or UIG) has been considerably more volatile than anticipated.

The volatility is partly caused by meter reads not being submitted and settlement calculations using new weather data. As a result, gas shippers must rebalance their trading positions at shorter notice every day as the amount of gas they are required to buy changes when the system recalculates due to the availability of new data.

Shippers are forced to buy or sell at short notice, sometimes during price peaks and because of this they are subject to combined additional costs which are reported to be between £20m-40m per month. Only a small number of shippers can afford these extra costs and sooner or later, the costs will be passed on to the consumer.

Customers of I&C Gas Services who are signed up to contracts which allow direct pass through are potentially the most at-risk to any price changes. However, as it stands shippers have not passed on these costs as they are a product of data or algorithm errors rather than actual usage.

Fixed contract customers should avoid any price increases but could see a large increase when their current contract comes up for renewal.

In order to tackle this issue, the gas industry is looking at a number of ‘work-streams’ which include standard Uniform Network Code (UNC) modifications to limit price fluctuations, as well as the potential of reforming the settlement calculation entirely.

For more information on changes on the gas and energy markets, feel free to get in touch by calling us on 01257 239500 or by filling out the form on our contact page.