The purpose of the constraint management scheme is to incentivise us to maximise the release of capacity and minimise the costs of constraints against a set financial target;
- If we manage the level of constraint costs passed through to consumers below the target, then we receive a revenue from the incentive.
- If costs are higher than the incentive target, then a cost is incurred (subject to sharing factors and cap and collar).
A capacity constraint can be broadly described as an event where we are unable to flow gas on or off our network to meet customer flows within the contracted levels of capacity our customers have procured.
We are obligated to release Entry and Exit capacity at around double peak demand. Flows of gas at these levels cannot be physically accommodated concurrently, meaning there is an inherent risk of constraints that must be managed. We manage the risk associated to asset reliability, maintenance and changing flow patterns using rules, tools (physical and commercial) and asset options.
Sales of certain capacity products, such as obligated and non-obligated Entry and Exit Capacity, feed into the incentive as revenue. Therefore, we are incentivised to maximise the sales of capacity, but may be exposed to the costs of capacity buybacks if we sell too much.