Question 1.1.24
Related documents: TRUM 3.2.5 (Page 17); TRUM Annex 2: Example 7.01 and 7.02; FAQ 4th Edition March 2016 (Q1.1.11; Q3.1.11; Q3.1.13).
Can you please clarify the reporting route for the following scenario relating to bilateral gas transactions in the UK:
Party A and Party B enter into a framework agreement for executing bilateral gas swaps between UK entry (beach) and exit (NBP) points. The purpose of the agreement is to agree on how to share the financial savings (benefit) received by Party A paying only the short haul gas tariff rather than Party B paying gas entry commodity charges and Party A paying exit commodity charges. The framework states that the mechanism for achieving this benefit will be by executing individual back to back bilateral transactions under the general master agreements for beach and NBP transactions respectively each time the traders agree to transact.
The framework agreement doesn’t set a price or volume and doesn’t place any obligations on either party to enter into any transactions. Whenever the traders agree to trade under the framework agreement, Trader A and Trader B will agree the period, price and volume for each transaction at the time of entering into the individual back to back transactions with the final prices agreed on any day for the beach and NBP transactions being inclusive of the share of any benefits from the short haul tariff savings as set out in the framework agreement.
Example: In practical terms, each time the traders agree to transact under the framework agreement, Party A will agree a price with Party B to buy a set volume of gas over a set period (day) at the beach under a general master agreement and at the same time agree the price to sell the same volume of gas over the same period (day) to party B at the NBP under a separate master agreement. Both transactions will be executed as bilateral transactions (outside of an OMP) but are the same as contracts admitted to an OMP and therefore classified as standard contracts in accordance with TRUM section 3.2.5.
Our interpretation is that as the framework agreement setting out the mechanism for agreeing the gas swap is a general agreement that doesn’t define a volume or price, it will not be reportable under REMIT. However, each time the traders agree to enter into back to back transactions in relation to the framework agreement, both transactions should be reported as separate standard contracts carried out under their respective master agreement and reported using Table 1 on Day +1. This is our preferred approach and we are seeking ACER’s views on this approach.
However, we can also see similarities to the example 7.01 and 7.02 in the TRUM where the framework would be reported as table 2 (D+30) and the individual executions rolled up and reported monthly as table 1s (D+30).
Answer
As the price and quantity are set prior to the delivery, the back to back transactions shall be reported via Table 1. The framework contract is not reportable.