Mod Entry Capacity Transfers Transmission Work Stream, 5 April 2007

Introduction  Mod 133 was deferred at the March Mod Panel. We understand the issues to be a lack of clarity on how unsold entry capacity would be offered in the AMTSEC auction rounds and the operation of the 90% rule.  We have reflected on mod 133 and & would like industry input on a number of key topics before we revise the mod.  Our intention is to have a workable solution in place to transfer capacity for this winter.  We welcome your comments today & would also appreciate any written comments on this topic by Wednesday 11 April, all comments should be sent to:

Issues – Complexity (1)  Discussions have indicated that complexity of mod 133 is a major issue for industry, this is driven by:  Application of the 90% rule  Holding the auction over 4 rounds  Lack of clarity of the Exchange Rate methodology  National Grid NTS believes that this level of complexity arises from our requirement to provide fixed Exchange Rates ex-ante

Issues – Complexity (2)  For Discussion – do we need to publish ex-ante Exchange Rates  If we did not have to provide them National Grid NTS believe it could have the following benefits:  result in a single round auction  shorten pre auction processes  ensure the maximum amount of bids are satisfied in the shortest available period of time

Timeline – as currently drafted 1: AMSEC results or Mod implementation date 2 2. AMTSEC registration process initiated 3. Shippers registered/NG calculate Ex Rates : Publication of auction details via invitation Auction held Business days 2 6. Allocations provided to Users 1 7: Auction information to all users 2 8. For round 2, Return to step 2 & repeat steps until all unsold capacity transferred or 4 auction rounds completed Total number of days = 45

Timeline – for 1 round auction 1: AMSEC results or Mod implementation date 2 2. AMTSEC registration process initiated 3. Shippers registered 122 4: Publication of auction details via invitation 7 5. Auction held Business days Allocations provided to Users 7: Auction information to all users 2 Total number of days = 39

Issues – Bid Evaluation  Mod 133 as currently drafted translates all bids into a common bid stack based on a common unit price determined by: Bid Quantity * Bid Price * Exchange Rate  For Discussion - would this still be appropriate if we did not have to provide ex-ante Exchange Rates?  Suggestion – we form the bid stack based only on bid price (but also apply a minimum quantity), this would ensure that capacity is transferred to where it is valued most

Issues – Application Fee For Discussion – should the application fee:  be a one off fee applicable to all participants irrespective of which recipient ASEP the User bids at  be targeted on a per ASEP basis i.e. all bidders at a specific recipient ASEP will pay an application fee based on the costs attributable to that ASEP

Issues – Transitional Arrangements  Current drafting requires the AMTSEC auction to be initiated from the implementation date of mod 133, there is no provision within the mod if this date falls during the running of another auction  For Discussion – the transitional arrangements to be amended to reflect that National Grid NTS will initiate the AMTSEC auction within 2 business days of implementation of this proposal unless:  This date falls within the running of the QSEC auction  This date falls within the running of an RMSEC auction  Should the first AMTSEC only cover winter 07/08??