User Pays User Group 8th December 2008

Agenda  Customer voting arrangements  UPUC & UPCEG ToRs  Funding change  Contract refinements register  Future service developments  AOB  ACS review for 2009/10  Customer Survey  Operational update 2

UPUC - Customer Voting Arrangements Recap of the Background  There has been significant time spent on debating customer voting for non-code service change  The agreed objective was to ensure a voting arrangement was put in place to ensure  all users were able to influence decisions, and  the influence reflected to an appropriate extent the customer’s usage of the services.  Existing industry models were reviewed, but none considered appropriate for User Pays  xoserve provided some proposals which weighted the voting rights of each customer  At the UPUG meeting on 17 th October agreement was reached to use a weighting by using the square root transformation technique.  The acceptance level was set at 75% 3

UPUC – Customer Voting Arrangements  Following the UPUG meeting on 17 th Oct, xoserve undertook further engagement with customers  Some concerns were expressed over the voting arrangements by I&C shippers  The extent to which change might be imposed on them  The financial risk that this may present to them  We were asked to review the voting arrangements being put forward under SPAA for I&Cs  1 customer 1 vote; by market type; niche market and mass market  Options have been discussed previously by UPUG and not accepted  As a result, xoserve propose reviewing the pass rate for the existing proposal to address the I&C concerns  This will need to be considered with the work done to further clarify the funding of change covered later in the agenda 4

What does changing the square root pass rate mean? Acceptance level to agree change Voting % by groups At 75% pass At 80% pass At 85% pass Domestic/I&C73%666 I&C only26%124 Others1%All To stop change Voting % by groups Saying NO at 75% Saying No at 80% Saying No at 85% Domestic/I&C73%221 I&C only26%1175 Others1%000 At 75% the top six plus one I&C company have to all vote yes, whilst at 80% it will take at least two I&C only companies to gain agreement At 75% two of the top six or eleven I&C only companies can stop change, whilst at 80% it still take just two top six or seven I&C only companies. At 85% one large company can stop change. Number of shippers Note: assumption is that others (MEUs etc) will not exercise their vote, which will be equivalent to a ‘yes’ vote 5

Next Steps for Voting Arrangements 6

UPUC and UPCEG Terms of Reference

User Pays User Committee Summary Terms of Reference  User Pays User Committee  Discharges the functions described in the Contract  Facilitates discussion, operation and development of UP Services  Membership  contracted parties (voting rights), plus  other non-voting participants e.g. chair, Gas Transporter etc  Additions following customer review  Quoracy  four voting members and xoserve  Customer voting convention  square root transformation technique, agreement based upon [75%] acceptance 8

User Pays Contract Expert Group Terms of Reference Summary  User Pays Contract Expert Group  Discharges the functions described in the Contract  Facilitates discussion, operation and development of UP Contract. In particular:  Administration of the Contract change procedures  Reviewing the operation of the Contract conditions  Membership  contracted parties (voting rights), plus  other non-voting participants e.g. chair, Gas Transporter etc  Additions following customer review  Quoracy  four voting members and xoserve  Defines the process to change the Framework Contract, including Conditions and Services Schedule 9

Funding Non-code Service Change

UPUC Non-code Services Change Process User Pays User Committee representatives) xoserve 1Submit Change Order 2 Prepare Evaluation Quotation Report: (EQR): -Confirm requirements -Initial xoserve view -Impact assessment to include consideration of UPCEG (a) Considerations: -Legally permitted -Existing legal/contractual obligations -Within gas business -Within capability 3 Accept EQR by sending Business Evaluation Order 4 Prepare Business Evaluation Report (BER) -Design options -Development funding -Ongoing service funding -System constraints -Changes to the Service Line Agreement -T&C change assessment 5 Approve Business Evaluation Report (selected design option and funding option) (b) If xoserve incur significant costs, BER to be funded 7Sign off User Pays community Agree Change proposal Agree option User Pays Contract Expert Group 6 Develop and implement 11

Funding Change – Non-code services a proposal  The contract review highlighted a requirement for explicit funding of change and transparency of the charging mechanism.  To address this, xoserve propose:  Proposals for new non-code services follow the principles in MOD 213 (change to user pays code services)  Proposals for changes to existing non-code services are funded by a change budget  The ACS would be updated to reflect the charging methodology for the above  These proposals are considered in more detail on the following slides 12

Funding Change – New non-code services  New non-code service requests  As per the principles outlined in Mod 213:  User beneficiaries pay for the change  The change order will define  Whether it is a new service request  Who the beneficiaries are  The proposer’s views will be reflected in the EQR prepared by xoserve  Customers will vote on accepting the EQR and thus confirm  Whether it is a new service and  Who pays 13

Change funding for existing non-code services  Propose funding of existing non-code services from a change budget  A change budget would be agreed at least annually by UPUC and reflected in any update to charges  The change order will identify that it is a change to an existing service and should be funded from the change budget  The proposer’s view will be reflected in the EQR prepared by xoserve  Customers will vote on accepting the EQR and thus confirm it is a change to an existing service and the change budget can be used Funding options  Smear change budget across non-code services  £25k change budget equates to a 1% price increase on non-code services or  A charge to fund the change budget will be made at the beginning of the financial year to each customer based on their forecast usage of non-code services 14

What else would need to be done if proposal is accepted?  Contract will be updated to reflect additions to the change process  The funding of change methodology for both new and changes to existing non-code services will be included in the ACS  Once up and running xoserve will provide monthly reports on change spend 15

UPUC Non-code Services Change Process Modifications User Pays User Committee representatives) xoserve 1Submit Change Order 2 Prepare Evaluation Quotation Report: (EQR): -Confirm requirements -Initial xoserve view -Impact assessment to include consideration of UPCEG (a) Considerations: -Legally permitted -Existing legal/contractual obligations -Within gas business -Within capability 3 Accept EQR by sending Business Evaluation Order 4 Prepare Business Evaluation Report (BER) -Design options -Development funding -Ongoing service funding -System constraints -Changes to the Service Line Agreement -T&C change assessment 5 Approve Business Evaluation Report (selected design option and funding option) (b) If xoserve incur significant costs, BER to be funded 7Sign off User Pays community Agree Change proposal Agree option User Pays Contract Expert Group 6 Develop and implement Proposer states whether it is a new service plus beneficiaries or a change to an existing service EQR reflect proposer’s view of change and funding of the change Customer vote to accept EQR and thus agree the nature of the change plus its funding approach 16

Contract Refinements Register

Update  As at 1 st December, only one further set of contract comments have been received  No additional points to those discussed at the last UPCEG  Have reviewed change funding for non-code services within this meeting  Other main issue was the “final” word in the change Schedule  xoserve is reviewing this wording 18

Contract and ToRs time line  xoserve has to complete any redrafting following discussion and agreements reached in this meeting, especially around funding of change  We will send out revised Contract on Friday 12 th Dec for comments back by 24 th December  Walk through the Contract on 15 th December  Will also contact individual parties who have formally commented in detail on the contract  Final contract to go out week of 5 th Jan 2009  Contract signing to be completed by 31 st Jan  Any subsequent changes will then be subject to the change process  UPUC and UPCEG ToRs to be signed off at 12 th Jan user pays meeting 19

Future service developments (to follow)

AOB

ACS Review for 2009/10

ACS price review for 2009/10  ACS will be updated for 1 st April 2009  ACS has to be with Ofgem by 1 st March  Draft to be reviewed at UPUC 9 th Feb  Indicative prices to be reviewed at UPUC 12 th Jan  Updated demand forecasts will be required  Requests for your expected demand for 2009/10 will be provided to you this week  Your forecasts for next year is required by Friday 2 nd Jan  ‘Final’ ACS review report for this financial year will also be produced, in line with the report produced for the September update 23

Customer Survey

 Implementation and governance of the new User Pays regime have raised some distinct challenges for xoserve  Wish to learn lessons to improve customer service  Like to know your views and opinions surrounding the implementation of the User Pays arrangements  Asked Maven to carry out a series of face-to-face and telephone interviews  They will be writing to you, the contract managers, and calling to set up an interview  Hope you can take part 25

Operational Update

Telephone Service Line No of calls Service Availability (target 95% availability) Call answering (target 90% within 30 seconds) October 31,330 99% (2 hrs loss of service13/10/08) 93% September 28, %91% August 28, %91% 27

IAD Service Line Number of Accounts (original forecast 12,500, revised ACS average 13,900) Availability (Target 95% availability during core hours) October16,500100% September14,900100% August14, % 28

Report Service Line No. of reports (forecast 150 per month) Performance (2 and 5 business days) October137100% September98100% August91100% 29

Portfolio Reports Reports sent in the month (forecast 80) Performance standard October113 September111 August110 30

AQ Enquiries Number of AQ Enquiries processed Performance (Target process by end of second Business Day) October23,595100% September2,393100% August164,450100% 31

IAD Account Transaction Volumes Accounts Created (normal process) Bulk Password Resets NumberWithin 10 days Number Requested Completed within Month October %153 Sept 67364%200 August 59086%1,068 July 88099%1501,200 June 69597%1, May 68766%1350 April 55685%1,890 Ongoing close monitoring of performance in this area continues 32