These tools are substitutes for physical pipeline capacity and there are currently two forms:
Long Run Contracting, which is comprised of commercial arrangements at five specifically named direct offtakes in the South West of the network to ensure that National Grid retains the ability to manage the network following the introduction of the universal firm exit regime through Exit reform.
Constrained LNG, where National Grid can procure services at the Avonmouth LNG Storage Facility as a substitute for network investment during periods of high demand in the South West.
The TSS Incentive scheme runs from 1 April 2013 until October 2018 and takes the form of an overall cost minimisation incentive with incentive performance driven by the difference between the TSS costs over a year and a target value for such costs. For 2017/18 this cost target is £9.1m (subject to RPI).
If the net position of TSS costs is below the target, National Grid receives an incentive revenue equivalent to 44.36% of the under spend, up to a maximum of £4.0m when TSS costs are zero. Conversely, if the net position of TSS costs is in excess of the target, National Grid incurs an incentive penalty of 44.36% of the overspend. There is no limitation on this penalty.