What is it?
Nobody knows, that’s the point! Essentially, National Grid know how much gas has been used on a total level but when they try to allocate meter by meter there is a difference. The gas has to be paid for, so the cost is smeared across all suppliers in the industry based on their market share.
What’s changed?
Without boring you with too much detail, there has been a change in the allocation process – the process which assigns total volume to individual meters. This was part of the Nexus project which was a gas industry change implemented in June last year.
What’s the impact?
In terms of numbers, there has always been an element of gas which can’t be allocated. Post-Nexus however, the scale and volatility of this have dramatically increased. The percentage of UIG has increased from 1-2% to around 6% per month; and the cost to TGP has risen dramatically as a result. November and December have seen slight reductions but there is uncertainty as to why this is and if it will continue.
Who pays?
The table above shows that TGP has more than an extra £1m a month cost which we have to pay National Grid. Depending on their contract structures, some of this will be passed on to our customers.
All customers will be affected if the current scale of UIG continues, as all suppliers will have to start pricing the additional cost in to contracts. This will move UIG from a small proportion of a customer bill (<1%) to around 3%.
What is happening about it?
It’s fair to say that the majority of the industry are unhappy with the levels of UIG. Suppliers can propose modifications to industry rules and calculations and the industry has been working to create a number of these.
TGP is lobbying with fellow suppliers and working on a modification which we believe will further improve the situation. Further communication will come out when we know more.
Got Questions?
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