Energy balancing and neutrality

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UIG allocation issue

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How energy balancing works

Gas shippers buy gas from producers, trade gas and sell it onto gas suppliers. Importantly, they need to use the National Transmission System (NTS) to transport the gas between these two players: this means they have a critical role to play in its overall balance.

A shipper must tell National Gas through a gas flow nomination within the Gemini system of how much gas it intends to either input or offtake at each separate entry or exit point on the gas network.

Gas shippers are financially incentivised to encourage them to balance their gas inputs and outputs every day. National Gas in their role as residual balancer will undertake market balancing action if they believe the gas network is likely to move outside of the acceptable range of balance.

Shippers face two charges for incorrectly telling National Gas when they’re flowing gas into the NTS:

imbalance/cash-out charges – encouraging shippers to balance their inputs with their outputs
scheduling charges – encouraging shippers to accurately nominate the amount of gas that they flow on and off the system

The ‘balancing neutrality’ mechanism makes sure that National Gas, as Transmission System Operator (TSO), don’t make or lose any money through carrying out their role as the system residual balancer, or through settling shippers’ imbalance charges.

What happens to the balancing charges?

All the money that changes hands during the imbalance settlement process, and any National Gas market balancing actions costs, feeds into a ‘neutrality pot’. Other charges, such as scheduling charge payments, may also be added. The balance, whether positive or negative, is redistributed back to shippers based on their usage of the system.

The balancing neutrality charge to be recovered from or credited to shippers is the difference between the amounts received and the amounts payable by National Gas in relation to all the applicable balancing charges.

Understanding neutrality charges on your invoice

The D13 record of the Energy Balancing Invoice (.IDB) file format details the total neutrality debt or charges for the period. This is detailed in the field titled ‘Smear Some Other’.

The D13 record details both the total industry throughput (in the ‘System Total INP OUT’ field) and your own total throughput for the period (in the ‘BA Total INP OUT’ field) which enables you to calculate your share of the charges.

Further information and resources

The UK Link Secured Documentation Sharepoint site holds the industry Neutrality Statements (Folder 33) for a given month with a breakdown of the Neutrality charges.

Credit Risk Management

Credit Risk Management is about ensuring that customers are protected from financial loss arising from commercial debt. The Credit Risk & Neutrality team ensures compliance with the Credit Rules (developed alongside the industry) and meets quarterly with the Credit Committees to provide an operational update.

The Credit Rules can be found under the following links and set out the operation of The Credit Risk Framework, the credit assessment process, credit monitoring, the further security framework and payment of invoices.

DSC Credit Committee | Joint Office of Gas Transporters

Energy Balancing Credit Committee | Joint Office of Gas Transporters