Consideration of issues raised by UNC Modification Proposal 0244 RG 0264 - September 2009

Background Reduced demand at DM Supply Points as a consequence of economic downturn Mothballed plant Reduced / curtailed production Current UNC rules limit opportunities for the reduction of Registered DM Capacity Concerns raised by Consumers at Gas Customer Forum UNC Modification Proposal 0244 (and 2 alternates) raised in March 2009 sought changes to UNC regime governing reduction of the Registered DM Capacity All three proposals rejected by Ofgem in May 2009 ‘Rules and options’ analysis commissioned with xoserve

Ofgem Decision Key points within decision letter None of the 3 proposals recommended for implementation by the UNC Modification Panel Applicability of undue discrimination rules (EU Gas Directive 2003/55/EC) ability of NDM and DM SPs to vary ‘level of charges’ - BTU form Limited evidence and analysis appropriateness of differential treatment of NDM / DM level of demand for reduction of DM SOQ below BSSOQ level of reduction of DN revenue (NDM incur costs / cross subsidy) Analysis also required impact on Consumers of any proposed solution impact on other Consumers of any proposed solution (no inappropriate socialisation of costs) suitability of proposed arrangements in respect of prevention of gaming Relief rules to prevent gaming temporary transitional (i.e. value of relief subsequently recovered) Ofgem noted that there is no link between DN revenue and usage Ofgem questioned whether implementation could lead to inefficient investment / stranded assets Ofgem questioned whether detrimental to efficient operation of systems efficient discharge of licence obligations (charging methodology) effective competition between shippers

BTU Form UNC TPD G1.6.13(a)(ii) Appeal between 1 September and 31 July only Enables change (increase or reduction) to AQ (and therefore to the NDM SOQ subsequently derived) Requires a change to consumers plant that changes the basis in which gas is consumed Unless there is a change to the plant (and consequently a change to the basis on which gas is consumed) the BTU form cannot be utilised to vary the AQ