UK government consults on gas supply contingency plans

The UK government is seeking the views of businesses and other stakeholders about new proposals to update the arrangements for ensuring that priority users retain gas supply in the event of gas shortages. The proposals focus on updating the current priority user lists; amending the eligibility criteria for priority user status; and simplifying the administration of the priority user scheme.

The government considers that these changes will improve the current arrangements to help ensure that those most in need of gas supply can continue to use gas for as long as possible.

The proposals have no effect on gas consumers who use less than 732,000 kwh (25,000 therms per annum) but could potentially have business continuity implications for larger gas users.

The executive summary of the new proposals reads as follows (verbatim):

The gas priority user arrangements will only be invoked in the unlikely scenario that there is, or is likely to be, insufficient gas supply to meet demand – e.g. because of disruption to a major supply of gas into the system. Initial steps for dealing with such an eventuality include appeals to reduce gas usage, and requirements on shippers and storage operators to maximise gas supplies and withdrawals from storage. However if these mechanisms are insufficient to resolve the situation, consumers using their 732000kv (250000 therms) per annum may be instructed to cease use of gas for the duration of the supply shortage unless they are designated as priority users. It is important to note that in all but the most extreme circumstances supply will be maintained to smaller gas consumers, i.e. those using less than 732,000 kwh (25,000 therms) per annum. All domestic consumers, most SMEs and many parts of critical national infrastructure will fall within this limit. The issues raised in this document will therefore not be directly relevant to them.

There are currently three types of priority user:
- “Category A”: those for whom disruption to gas supply could cause loss of life (e.g. hospitals and care homes). They can continue to use gas for the duration of the shortage (unless sections of the gas network have to be completely shut down). It should be noted that smaller care homes and hospitals may use less than 25,000 tpa and therefore their supplies will be protected without a requirement to be placed on the priority user list.
- “Category B”: those that would be in category A but for the fact that they have purchased interruptible contracts (because they can switch to alternative fuels). They should be allowed to continue to use gas for as long as it takes to switch to those alternative supplies (provided that period does not exceed the notice period applicable to interruption of supply under the interruptible contract).
- “Category C”: those for whom disruption to gas supply could cause in excess of £50m damage to their plant. They can only continue to use gas to the extent necessary to avoid the plant damage (which may just mean continuing use of gas for the time it takes to cease production at the plant).

The key issues we address in this document are as follows:
- The current category A and B lists should be updated. We will ask gas suppliers to ensure that all their non-domestic consumers using more than 732000 kwh (25,000 therms) are aware of the priority arrangements, and we shall work to contact all hospitals and care homes with relevant details. We seek views on any further action that should be taken.

- We consider changing the criteria for Category C either to broaden the scope of costs that may be taken into account, or to alter the currently applicable £50m threshold. In general we conclude that no changes should be made, but we need to consider protection of supply to facilities where there would be necessary and inevitable consequent plant damage of £50m to a separate facility. We also seek views on the scope for moving to a more market based approach in the longer term.

- We consider the scope for requiring large consumers to reduce, but not completely cease, their gas usage. Our initial assessment is that we have exploited market mechanisms as far as we reasonably can at this stage. We discuss two means of compulsory demand reduction – mandatory reduction to a given percentage (e.g. 25%) of average daily usage, and mandatory cessation but for only limited periods on a rota basis. We see significant difficulties with both approaches but invite views on how these could be overcome.

- We propose some improvements to the administration arrangements, in particular to ensure a rigorous review of the lists (both to ensure that genuine priority users are on the list, and that users who no longer require such status are taken off); and to improve the clarity and consistency of arrangements through provision of a suite of standard documentation.

The closing date for the consultation is 20 October 2006 and the full consultation document can be found at http://www.dti.gov.uk/files/file32080.pdf

•Date: 17th August 2006• Region: UK •Type: Article •Topic: BC general
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