NTS Exit Regime Transmission Workstream – 6 th July 2005

Contents  Update on Authority Decisions  Proposed Transitory Arrangements  UNC Changes  Way Forward

Update on Authority Decisions  Authority decision on Network Sales concluded that NTS Exit arrangements required reform to be introduced in two phases:  “Interim” Arrangements established new commercial framework recognising the new NTS/DN interface  “Enduring” Arrangements (by September 2005) to introduce more market based arrangements effective from gas year 2008/09  On 24 June, Authority announced delay to implementation of Enduring Arrangements until September 2007 for release of capacity rights from gas year 2010/11

Implications of delay  Regime requires to be extended to cover gas years 2008/09 and 2009/10  Regime requires to address within and beyond typical 3 year investment lead time  Concept of “Transitory Arrangements”

Transitory Arrangements - Proposed Objectives  Minimal process and contractual changes  Economic and efficient regime development  Not unduly discriminatory

Transitory Arrangements - Proposed Principles  Capacity products and contracting/invoicing parties unchanged  DNs need capacity allocations for 3 years ahead under Safety Case (Transco NTS interpretation)  Require extension of capacity rights beyond 30 Sept 2008  Incremental investment underpinned by financial commitment  Additional information from DCs and DNs to support 5 year NTS development plan

Information Exchange  Formulation of 5 year NTS development plan requires NTS offtake specific information  Formalise previous internal process for DNs  Provision of offtake specific peak and off-peak information –by July each year –non-contractual discussions for 2005  Invite DCs to participate in provision of indicative capacity requirements  Better facilitate economic and efficient development of NTS and DNs  Publication of information to market?

Universal Capacity Reservation Process  Opportunity for existing and new DCs and DNs to signal indicative requirements for all capacity 3 years or more ahead through a common process  Financial commitment to reserve capacity that requires NTS investment  Commitment that capacity will be booked for at least [1] year from agreed delivery date  Provides assurance to contract holder of availability of capacity

Capacity Application and Allocation Process  DCs  Follow existing UNC processes  Requests within investment lead time subject to same mechanisms as under IExCR  DNs  Applications: Able to request during June/July –changes to current allocations within investment lead time –capacity for investment critical year  Allocations: –requests for the investment critical year will be allocated if within reservation amount –other requests subject to same mechanisms as under IExCR  Offtake Capacity Statement confirms entitlements by 30 Sept –satisfies DN safety case requirement

Way Forward  Changes necessary to satisfy  Transitory Arrangements  Safety Cases  Economic and efficient development of NTS and DNs  Non-discriminatory capacity release  UNC Mod Proposals required  Incentive Arrangements to be developed