Operating Margins (OM) gas is used by National Gas when necessary to address operational stress on the National Transmission System (NTS), caused by large supply or demand changes, or to manage unplanned asset unavailability. 

What are Operating Margins? 

OM gas may be procured either in advance or at the point it is required. In either case, it is gas held in reserve, ready to be released at short notice to rebalance the network in a range of scenarios. Operating Margins can be either an increase in supply onto the NTS or a reduction in demand from the NTS. 

Why do we need Operating Margins? 

Operating Margins are required to ensure the safe and reliable operation of the gas network during periods of operational stress. They serve as a fast-acting buffer that: 

• Bridges the gap until market based balancing actions (national or locational) can take effect. 
• Helps the system respond to unexpected events such as plant failures, sudden demand changes, or loss of supply. 
• Provides a critical tool before or during a Network Gas Supply Emergency (NGSE), where immediate intervention is needed to protect system integrity. 

OM gas can be used in the period after any of the following events, if other system operator actions are insufficient:  

• Supply loss: terminal, sub-terminal, interconnector, LNG importation terminal.  
• Compressor failure or pipe break (including loss of infrastructure that renders pipes unusable).  
• Demand forecasting error.  

We also procure a quantity of OM gas to manage the orderly run-down of the system in the event of a NGSE, while firm load-shedding takes place.

How do we purchase Operating Margins? 

Operating Margins (OM) are procured through an annual tender process, which typically runs from November to March, with contracts commencing on 1 May each year. This process is conducted in accordance with: 

• TPD Section K of the Uniform Network Code (UNC), which sets out the rules governing the procurement and utilisation of OM; and 
• The obligations outlined in the National Gas Safety Case, which detail the requirements for maintaining the safety and integrity of the National Transmission System (NTS). 

Types of Operating Margins contracts 

We procure OM using two distinct contract types: 

1. Capacity Arrangements - These involve securing physical storage capacity within GB gas storage facilities. Once capacity is booked, we procure gas to fill that capacity so it can be held in reserve and deployed when required. 

2. Delivery Arrangements - Under these contracts, we secure an option to purchase OM gas at the point of need rather than procuring and storing the gas upfront. This provides flexibility during operational stress events and reduces the need for physical storage capacity. 

Procurement of gas for Capacity Arrangements 

For Capacity Arrangements specifically, we procure the gas required to match the booked storage capacity. This gas may be sourced via: 

• Wholesale market transactions (e.g., through NBP trades), ensuring competitive pricing and liquidity; or 
• Internal storage site transfer mechanisms, where the storage facility itself is able to supply gas directly into the contract. 

This approach ensures that OM holdings are physically available, deliverable at short notice, and compliant with the operational and safety standards set out in the UNC and Safety Case. 

Who can provide Operating Margins?  

Operating Margins can only be provided by shippers, registered users of the National Transmission System (NTS) who are also signatories to the Uniform Network Code (UNC). These shippers can provide OM services from a range of NTS‑connected facilities capable of delivering gas or reducing demand at short notice. 

1. OM Capacity Agreements - These agreements are typically offered by: Storage facility operator shippers, or Shippers holding primary storage capacity at GB gas storage sites. 

Under Capacity Agreements, the provider holds gas in storage specifically for OM purposes. When called upon, this gas can be quickly delivered back to the NTS. 

2. OM Delivery Agreements - Delivery Agreements allow OM provision from facilities that may not store the gas in advance but can supply or reduce demand rapidly. Eligible providers include: 

• Primary capacity holders at LNG importation terminals with storage, who can deliver gas onto the NTS at short notice. Combined Cycle Gas Turbine (CCGT) power stations, which can contribute by reducing gas offtake, effectively providing an OM service by lowering demand on the system. 
• Shippers who have booked capacity at Interconnector Facilities (Balgzand Bacton Line (BBL) and/or Interconnector UK) who can provide either a demand reduction from the NTS and/or a supply increase to the NTS.

How are Operating Margins service providers are compensated? 

Shippers providing OM receive: 

• A standby payment, covering the commitment to hold capacity or availability for OM purposes. 
• A utilisation fee (Delivery Agreements only), payable if they are instructed to deliver OM gas onto the NTS during an operational event. 

This structure ensures providers are fairly compensated for both readiness and actual delivery, while supporting the resilience and safety of the gas transmission network.