Gas Deficit Warning and Margins Notice Changes

Gas Deficit Warning and Margins Notice Changes

This winter, we are changing the name of our Gas Deficit Warning and making some changes to how we calculate

and notify the market of potential gas supply/demand imbalances. Please read the information below to find out why

we are making these changes and what they mean for you.

Note: Videos explaining GDW and MN along with a Q&A can be downloaded at the bottom of this page

Changes to the Gas Deficit Warning

• What is a Gas Deficit Warning (GDW)?

National Grid may issue a Gas Deficit Warning (GDW) when there is a difference in national gas supply and demand that

presents a material risk to the ability to meet forecast within-day demand. We issue a GDW to announce to gas market

participants that they either need to provide more gas or reduce demand. It is a market tool used in normal market

operation as an indication to the market that National Grid is not seeing a sufficiently timely balancing response to what

is most likely an unforeseen event(s). National Grid is then able to access further balancing tools to resolve the mismatch.

• What is the name changing to?

We are changing the name to Gas Balancing Notification (GBN).

• Why has the name changed?

A GDW does not necessarily mean there is insufficient gas available, nor that the declaration of an emergency is imminent.

Even if this were the case, there are a number of steps to go through before domestic gas customers would be impacted.

The last time we issued a GDW it caused confusion in both the industry and the media.  We are changing the name to

provide greater clarity to the market and the public and reduce the risk of unnecessary market concern, inaccurate

reporting, and unnecessary public perception of a gas security of supply crisis if we have to issue future notifications.

• What benefits are expected from this change?

Changing the name should help the industry to have greater clarity about what the notification means and to respond

more efficiently. This could deliver consumer benefits from a reduced risk of exposure to within-day gas price spikes.

• Are there any disadvantages of this change?

We have consulted with stakeholders and were given the feedback that the name change may confuse the market and a

more neutral name might risk a reduced response (given that the 1 March 2018 GDW did what it was designed to do).

On balance, we feel that the benefits of the name change outweigh the potential downsides. We are therefore

communicating with customers and stakeholders to help them understand why we have made this change. 

• What needs to be done to implement the change?

We understand that some industry contracts between shippers and end consumers reference GDW as a trigger point,

so shippers will need to make sure that these are changed to include the new term.  We have updated National Grid

procedures and the relevant pages on our website.  Our Licence, Safety Case and Gas Balancing Guide will also be

updated in due course.

Changes to the Margins Notice (MN)

• What is a Margins Notice?

National Grid may issue a Margins Notice (MN) to the market when the forecast demand for the next Gas Day is equal to,

or greater than, the Expected Available Supply for that Gas Day. This effectively signals to market participants that they

may need to either source more gas or limit demand to avoid a supply / demand imbalance on the following day.

• What is changing and why?

Historically, we have never issued a Margins Notice, not even on 1 March 2018 when we went straight to a GDW due to

the circumstances on that day. We decided to review the calculation and process for issuing an MN with an industry

working group to help minimize the potential for surprise to the industry and make sure we communicate effectively when

the supply / demand position is looking tight.  So, we have worked with the industry to review the process and will be

making the following changes for this winter:

1)    We will inform shippers via Active Notification System (ANS) when D-1 forecast demand exceeds 95% of expected

available supply

This additional notification is designed to provide earlier and more regular communication to the industry when the

supply/demand balance is looking tight at the day ahead stage. The working group considered that 95% of expected

available supply was a suitable threshold for this notice to be triggered.

2)    Limiting the use of Margins Notices to the winter (1 October to 31 March)

Storage sites and IUK change from predominantly delivering gas to the NTS during winter to become predominantly

demand points during summer. Such shifts in behaviour can obscure the MN assessment by 'artificially' increasing

national demand and therefore a MN issued in these circumstances could be misleading. For the summer months, in

periods of tight margins it is expected that storage sites and IUK could revert to being sources of supply if required. 

We have agreed to extend the Margins Notice process into April at our discretion to cover against any cold snap at the

end of the winter. 

3)    Introducing a new method for determining the LNG contribution to expected available supply

It is difficult to work out the expected level of supply capability from LNG terminals due to their ever-changing stock levels

and flexible nature of supply.  The proposed new methodology looks at an expected daily capability based on historical

LNG flows and an assumed quantity of usable stock.  This new method facilitates a greater level of transparency of the

contribution of LNG to expected supplies and is expected to reduce assumed LNG capabilities to more credible levels.

This does increase the potential for Margins Notices to be triggered.   

Interconnectors are another flexible source for which it is difficult to set an expected supply capability. We therefore

developed a potential new mechanistic methodology for those supplies based on recent flows and NBP: continental hub

price differentials.  However, had both the LNG and interconnector methodologies been in place during previous winters,

Margins Notices would have been issued at demands below 300 mcmd which was felt to be inappropriate. Therefore, we

decided not to include the interconnector methodology in the reforms for this winter but will keep this under review. 

• Does this mean that more Margins Notices will be issued?

We may be issuing more Margins Notices in the future - we have assessed the new methodology against previous winters

and found that three Margins Notices would have been issued in February and March 2018 if the new LNG methodology

had been in place at that time. The changes are designed such that Margins Notices are not issued routinely and only at

times of genuine system stress. Overall, we believe this is a balanced set of proposals that will sharpen focus on gas

security of supply and provide more information to the market. 

• How do I access ANS?

We use Active Notification to alert all subscribed ANS users of Margins Notices. Shippers can elect to receive the

information by SMS or email. If you are an existing shipper you will need your Company ID, user ID and password to

access information via https://www.s2.emergencycallsecure.com/newlogin/

To subscribe to ANS please contact xoserve.customer.lifecycle.team@xoserve.com to ask for an account to be set up.

You can also view ANS messages without needing a login here - http://mip-prod-web.azurewebsites.net/PrevailingView/Index