Introduction of a single National Transport System capacity reference price (UNC903): request for information

What this is about

Ofgem is gathering evidence on UNC0903, a proposed modification to the Uniform Network Code that would replace the current locational capacity reference prices on the National Transmission System with a single uniform price at all NTS entry points. The modification is subject to an Authority decision, and this request for information is the evidence-gathering step before Ofgem produces a formal impact assessment.

The current system charges shippers different reference prices depending on which entry point they book capacity at. These prices reflect, at least in part, the underlying cost of the infrastructure serving each point. A shipper importing gas via an LNG terminal pays a different rate from one bringing gas through the IUK interconnector from Belgium or through the Langeled pipeline from Norway. UNC0903 would flatten this to a single number: every shipper pays the same regardless of where the gas enters the system.

The modification sits within a broader European context. EU gas network codes have moved toward uniform pricing methodologies, and post-Brexit GB has had to decide how far to maintain alignment. The current locational approach is a legacy of cost-reflective pricing principles that Ofgem has historically defended. UNC0903 is a direct challenge to that principle, and the fact that Ofgem is running a structured RFI rather than simply accepting or rejecting the modification suggests the decision is genuinely open. The RFI targets five distinct groups: shippers using IUK/BBL interconnectors, shippers using LNG terminals, shippers using Norwegian pipelines, the interconnectors themselves, and National Gas Transmission as the system operator. That segmentation tells you Ofgem expects the effects to differ sharply by supply route.

Options on the table

#### Status quo: locational reference prices

The current regime sets NTS capacity reference prices on a point-by-point basis. Each entry point has a reference price that reflects the long-run marginal cost of providing capacity at that location. Shippers booking capacity at cheaper-to-serve entry points pay less; shippers at more expensive points pay more. This is textbook cost-reflective pricing: costs sit with those who cause them.

The winners under the status quo are shippers using entry points with lower infrastructure costs, typically the interconnectors and some of the more established pipeline routes. The losers are shippers at high-cost entry points, particularly LNG terminals, which tend to be at coastal locations requiring dedicated infrastructure. The locational signal, in theory, guides investment: if a particular entry route is expensive, the higher reference price should discourage marginal use and signal that alternatives are cheaper for the system.

#### UNC0903: single uniform reference price

UNC0903 would replace all locational reference prices with one number. Every shipper at every entry point pays the same rate per unit of capacity booked. The total revenue requirement for NTS entry capacity stays the same; it is simply divided equally across all entry points rather than allocated by cost.

This is a redistribution. Shippers at currently expensive entry points (LNG terminals, Norwegian pipelines) would see their costs fall. Shippers at currently cheap entry points (interconnectors, some domestic beach terminals) would see their costs rise. The net effect on GB gas consumers depends on the pass-through: if shippers at cheaper entry points are currently providing the marginal supply that sets wholesale prices, their cost increase flows through to consumers. If LNG is marginal, the cost reduction at LNG terminals could reduce wholesale prices at the margin.

The deeper question is about the locational signal itself. A uniform price removes any cost-based reason to prefer one entry route over another when booking NTS capacity. Shippers would choose routes based solely on commodity costs, logistics, and contractual positions, not on the NTS capacity charge differential. Proponents argue this simplifies the market and removes a distortion (since the current reference prices may not accurately reflect true marginal costs anyway). Critics argue it socialises infrastructure costs and dulls the only price signal that disciplines where gas enters the system.

For interconnectors specifically, this matters. IUK and BBL compete with LNG and Norwegian gas for GB supply. If their shippers currently benefit from lower NTS reference prices (because the interconnector infrastructure is relatively cheap to serve), a uniform price erodes that competitive advantage. The RFI's separate targeting of interconnectors as respondents confirms Ofgem is alive to this.

Questions being asked

Ofgem has issued separate RFI documents for each respondent category. The questions are tailored to the supply route, but the themes are consistent across all five documents.

#### Capacity booking behaviour

- How would a single reference price affect your capacity booking and shipping decisions? [Ofgem wants to know whether uniform pricing would change which entry points shippers use, and whether current locational price differentials actually influence routing decisions or are too small to matter.] - What are the current cost differentials you face across entry points? [This is asking for the hard numbers: how much does the locational reference price actually vary between the entry points you use, and is that variation material to your commercial decisions?]

#### Cross-border flows and interconnector utilisation

- How would uniform pricing affect cross-border gas flows and interconnector utilisation? [Aimed primarily at interconnector operators and their shippers. Ofgem needs to understand whether flattening NTS entry prices would divert flows away from interconnectors toward LNG or Norwegian routes, or whether interconnector utilisation is driven entirely by continental price spreads.] - What effect would removing locational signals have on infrastructure investment decisions? [This is the long-run question. If entry prices no longer vary by location, does that change where new import infrastructure gets built, or where existing infrastructure gets maintained and expanded?]

#### Revenue and cost allocation

- How should the total NTS entry revenue requirement be allocated under a single price? [There are different ways to calculate a uniform price. A simple average, a weighted average by capacity, or a revenue-neutral rebalancing all produce different numbers. Ofgem wants to understand which methodology respondents consider appropriate and what the distributional consequences would be.] - What transitional arrangements, if any, would be needed? [Shippers and interconnectors may have long-term contracts predicated on current locational pricing. A sudden switch could create windfall gains and losses. Ofgem is asking whether phasing or grandfathering is needed.]

#### Competition and security of supply

- Would a single reference price affect competition between supply sources into GB? [This is the core competition question. If LNG shippers currently pay more for NTS capacity and that cost is reduced, does that make LNG more competitive relative to piped gas? Does that change the supply mix?] - Are there security of supply implications from removing locational price differentiation? [GB's gas security depends on diverse supply routes. If uniform pricing inadvertently favours one route over others, there could be concentration risk. Ofgem wants respondents to flag any such concerns.]

#### Data and evidence

- Can you provide historical data on your NTS capacity bookings, utilisation rates, and costs by entry point? [Ofgem is building the evidence base for its impact assessment. This is a data request, not an opinion question. The quality of data respondents provide will determine how robust the impact assessment is.]

How to respond

Deadline: 2 July 2026

Method: Email submission to gas.systems@ofgem.gov.uk

Format: Ofgem has published separate RFI Excel files for each respondent category. Shippers should use the template matching their supply route (IUK/BBL, LNG, or Norwegian pipelines). Interconnectors and National Gas Transmission have their own templates. The Excel files contain the specific questions and space for structured responses. The accompanying PDF notices set out the confidentiality, disclosure, and publication arrangements for each RFI.

Who should respond: Gas shippers active at NTS entry points and gas interconnectors (IUK and BBL). National Gas Transmission has its own separate RFI. Ofgem has not issued a general call for stakeholder views at this stage; the RFI is targeted at parties with direct commercial exposure to NTS entry capacity pricing.