Capacity allocation

In the United States, if existing capacity becomes available due to contract expiration or other similar events, the pipeline company must offer the capacity through an open season.

The open season process for existing capacity is similar to the process conducted for new pipeline projects (refer to the section above). However, the established maximum applicable FERC approved tariff remains in effect, and the pipeline company cannot accept bids greater than it. If the capacity is oversubscribed, the pipeline utilises a pro-rata capacity allocation method that has been approved by FERC during the certification process, to determine how much capacity each shipper is awarded.

In the European Union, the TSOs use auctions or the “first come first serve” procedure to market available capacity. Capacity for some Norwegian interconnects, UK cross-border points, and all other points in most European Union member states can be booked or traded on the European Internet platform called PRISMA (PRISMA, 2018).

PRISMA is the platform used by the TSOs to market their capacity. All transportation contracts and obligations are solely between the shippers and the TSOs, and PRISMA is not a party to such contracts.

The cross-border or interconnection entry and exit capacities between two TSO networks within the same country must be auctioned and are allocated as a single bundled product in auctions. If the pipeline capacity amounts vary on either side of an interconnect, then the bundled capacity offered in auctions will meet the lesser of the two sides of the interconnect. The TSO with the greater capacity markets that additional capacity as an unbundled product.

Capacity at the production entry points and at exit points to large users and LDCs is not auctioned. It is offered on a first come first serve basis. Any of the shippers may submit a request for capacity at these points, and if the capacity is available, it is granted to them (PRISMA, 2018).

Capacity contracts for yearly, quarterly, and monthly products are auctioned in “ascending clock auctions” and capacity contracts for day-ahead and within-day products are auctioned in “uniform price auctions”. Auctions for all capacity contracts follow an auction calendar. The calendar details the auction frequency, products offered, publication dates, auction start dates, bidding rounds, notification requirements, and auction type (e.g., ascending clock or uniform price). Before an auction starts, the amount of capacity to be marketed is published on the PRISMA website.

Ascending clock auction process

Ascending clock auctions may have multiple rounds if there is more demand than available capacity at a point. Shippers place volume bids against escalating prices announced for consecutive bidding rounds. Figure 10 illustrates how the auction works.

The price for the first round of the auction starts at the base tariff approved by the national regulator. The “large price step” and the “small price step” are the prices defined for each point and the contract term offered in an auction in advance to the beginning of the auction. These are used to make stepped price adjustments to each subsequent bidding round. To participate in an auction, it is mandatory for a shipper to place a volume bid in the first bidding round. In each consecutive bidding round, the shipper can only place a volume bid equal to or less than its

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volume bid in the previous round. If the total demand for the capacity in the first bidding round is less than or equal to the marketed capacity at the end of the round, then the auction closes. If not, then the auction begins the next round with a price equal to the price in the previous round plus the large price step.

Figure 10. Ascending clock auction

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