An Overview of UK Gas

Industry
 Objective

Objectives
• To give a quick and high-level understanding of the Gas Industry in UK
• To identify the key players and their roles in the UK Gas industry
• To explain the role of BGB in Gas industry
• To discuss the present challenges in Utilities Industry
Introduction – Utility Segments

Electricity Sector

Gas Sector

Water Sector
 Process Flow
Four processes of Utilities Industry

Conversion and refinement of primary

Generation renewable energy resources into electricity or
gas.

Transmission is the transportation of gas or

Transmission electricity to the various regions

Transportation of electricity, gas or water to the

Distribution end user

Process of Supplier who buys the energy and

Supply pays for it to be supplied to end user
 Gas Industry-Basics
Natural Gas
• About Natural gas
• Definition
• Contents
• Properties
• Uses of Natural Gas
• Domestic
• Industrial
• Benefits of Gas
• Efficiency
• Safety
 Market Players
Producers -These are companies that explore the gas, drill the wells and take gas from sea bed.
E.g Shell or BP

Terminal Operators -Terminals along the British coast that collect gas from producers and hand
it over to the transporter.

Shippers - Shippers buy gas from the Producers and sell it to the customers. E.g Centrica, BP
Gas Marketing

Suppliers - Buy gas from Shippers and sell it to the consumers. E.g Centrica, PowerGen, BP
Energy

Transporters -Transports gas from the terminals to consumers on behalf of Shippers.e.g TGT

Consumers -Sign contracts with the supplier of their choice and deal directly with the supplier for
bills and payments.

Meter Owners/Asset Managers - Meter owners specialize in procurement of the meter assets
and leasing it for monthly rental. In most cases Meter owner act as asset manager also, taking
responsibility for Installation and Maintenance needs
Meter Reading Agents-They collect data from metering systems and check the validity &
accuracy of data before it is processed

Ofgem - Only suppliers licensed by Ofgem (formerly known as Ofgas) can sell gas. Ofgem is the
Office of Gas and Electricity Markets. It was set up by the Government to protect the interests
of Consumers
Gas Supply Diagram
 Process
Transporting the Gas
• Gas Producers to reception points (Beach terminals)
• Treatment of gas for quality, adjusting CV
• Transported throughout UK using pipeline of Iron, Steel, Polyethylene mains
• High Pressure Pipe line -Gas is pushed to 3700 miles , 75bar
• Low Pressure Pipe Line -150 Off take points, 30 power stations, 19 LDZ to
Customer – 160,000 miles
• Transco mainly delivers Gas in UK
• Around 21 million customers through out UK
Supply of Gas
 Shippers
Shippers- Shippers buy the gas from the producers and initiate the supply chain.They
ensure the required gas is supplied to consumer premises

Activities
• Estimate demand for gas
• Buy gas from producers
• Make arrangements to transport gas to end-users and Book Capacity
• Trade gas with other shipper
 Distribution Network
Distributor- The gas is transported by Distributor to consumers through network of
pipelines consisting of high and low pressure pipes.
The National Control Centre operates and balances the high pressure National
Transmission System (NTS). The Area Control Centres are responsible for the next
level down in the gas supply network - they ensure sufficient fuel is available at the
right place and the right time to meet consumer needs.

EXIT ZONES
TOWNS/
STREETS

LDZ
SHIPPER 1
HOUSEHOLD

SHIPPER 2
NTS

INDUSTRY
SHIPPER N

FROM THE SHORES

NTS: NATIONAL TRANSMISSION SYSTEM

 Distribution Network
LDZ- The 19 Local Distribution Zones in the Gas Distribution Network…
 Gas Balancing
Distributor- Apart from Transporting the gas to Consumer, distributor also maintains a
balanced system by buying, selling and storing the gas to meet the demands

• Speed of gas – 25mph. Additional demand can not be met

• Gas Distributors ensure a balanced system by buying and selling gas and using stored
gas to ensure that in most normal circumstances, demand can be met
• Network Code-
• Establishes the rules that govern the supply of Gas
• Sets up the flexibility mechanism for buying and selling the gas
 Distributors- Functions

Functions
• Allow shippers to book capacity to transport gas to premises / other networks
• Transport gas owned by shippers to premises / other networks.
• Maintain safe operation of gas supply.
 Supplier Network
Gas Supplier - The Supplier is the company who buys the energy resource and pays for
it to be transmitted to the customer. The supplier publishes prices, reads meter issues
bill and deals with the payment process.

Meter Reading
Agencies
Meter Asset
Transmission Managers
Companies

Meter Owners

Supplier

Meter Workers
Shipper /
Distributor

Customer
 Suppliers

Activities
• Manage contracts with end-users / consumers
• Manage measurement of gas consumption at supply sites.
• Bill consumers for gas consumed.
 Consumers

Consumers : The end-users who consume the gas for a variety of purposes .

Types
• Domestic (Relatively small quantity of gas consumed, usually less than 73200 KWh
per year)
• Industrial & Commercial (Large consumers, usually greater than 73200 KWh)
 Changes in Gas Industry

Traditional (regulated) to Privatisation (Deregulated)

Regulated - Shortcomings Privatisation - Changes

• Monopoly leading to • Remove government

unfair prices controls thereby opening
the market
• Quality of services
• Change of ownership from
• Customer Choice state to private investors
• Introduction of
• Customer competitive markets
Dissatisfaction
• Customer choice –
• Regulatory demands ‘comparison shop’
• Customer service
Deregulation - Shift of Focus

Old Monopoly New Competition

Customer Regulator

Operations Operations

REGULATOR CUSTOMER
Events of Changes
• Gas Industry privatized in 1986
• Market opened in 1990 to large-scale industrial customers
• In 1993, British Gas split into Transco (distributor) and Centrica (supplier).
Centrica uses the brand name British Gas in UK

• Full scale competition since 1998

• National Grid has acquired Transco

• Improved quality of services because of competition

• Increase in consumption but decline in prices

• National Grid Transco – Restructuring of Metering Business in 2005. NGT

Metering is formed

Distribution Network sales- Divestment of one or more of NGT’s Distribution

 Licenses

Types of Licenses in Utilities

• Transporter
• Shipper
• Supplier
• Shipper- Supplier (Integrated License. E.g Centrica, BP)
 Reviews

Industry Process Reviews

• OFGEM takes the lead in periodically reviewing industry processes from the point of
view of promoting competition, thus improving service levels and reducing costs. A
typical case is the ongoing initiative to review Gas metering arrangements – Review
of Gas Metering Arrangements (RGMA). This attempts to set down new improved
processes in the Metering environment.
 BGB As Supplier
BGB –BGB as supplier is contracted by the customer to supply gas. The supplier
manages all day-to-day activities.

Role of BGB
• Purchasing the Gas
• Managing all the communication with customer
• Managing the Invoicing of customer
• Managing all the communication related to Asset works
• Managing the communication related to Asset reads

Communication –BGB interacts with the various parties electronically over a network by
means of file flows, which have a well-defined structure .
 BGB As Supplier…

Day To Day Activities

• Initiate Contract with customer
• Initiate registration with Gas Transporter
• Gas Transporter informs existing supplier
• BGB handles objections from existing supplier
• Transporter confirms BGB about start of supply
• BGB informs customer and handles Metering related activities
• BGB interacts with Meter Asset Manager and Meter Read Agent
• BGB interacts with Transporter for reads, queries etc
 Concerns - Gas Sector

• Decrease in natural gas supply leading to increase in prices

• Natural gas is the preferred fuel for producing electricity

 Challenges in Gas Industry
Major Challenges for the Gas Industry…
♦ Deregulation opens markets for competition in all market segments
♦ Comply with new requirements (market mechanics) driven by regulatory
bodies as outcome of deregulation
♦ Mergers & Acquisitions drive the need for homogeneous, integrated
IT landscapes
♦ Operational efficiency:
► plant / grid operation -> operate and maintain at optimized cost
► IT environment -> reduce number of heterogeneous system
landscapes;ensure tight integration of all deployed systems and to gain
best value out of available information
♦ Gain 360° view of your business to ensure adaptiveness

Deregulation

Generation Transmission Distribution Sales Services

Globalization
 Challenges in Gas Industry
Gas Utilities companies need to…
♦ Respond to competitive pressures across all market segments
(residential / commercial & industrial customers)
♦ Win new customers through targeted marketing and sales efforts
♦ Retain existing customers appealing tailored product and service offerings
♦ Enable efficient interaction and collaboration with customers through a
stable application software such as SAP, Oracle, Peoplesoft etc
Thank you !