Shipper Termination Rules Transmission Workgroup – 04 September 2014

Issue Discussions with industry parties has identified a potential issue with regards to the Shipper Termination rules. In limited circumstances the Termination rules do not prevent a Shipper from deferring their NTS Entry Capacity obligation. E.g. Where a Shipper operating at a single point on the NTS sets up a new Shipper entity then trades its existing NTS Capacity to the new Shipper entity for a future date: where a Shipper (the transferor) has traded capacity to another shipper (the transferee) and the transferor is subsequently terminated, NG is required under UNC TPD B5.4 to notify the transferee of the termination. after notification is provided the transferee can elect to become the registered capacity holder for the transferred capacity from a date after the discontinuance date (i.e. they can assume financial responsibility for the System Capacity from a future date of their choosing)

Issue However as this is a limited issue (in that it is likely to only arise where there is a single point shipper) there is a risk that any solution would have consequences for the wider industry and may be disproportionate for the issue that we were trying to address. The scenario as outlined is permissible under the UNC and as such we have concentrated on potential UNC solutions. We have looked at potential solution centered around Capacity Transfers, Termination and Credit. However none of the options explored is ideal with each having a number of drawbacks and some also having limited effectiveness.

Initial Thoughts Do nothing and monitor – to resolve the issue a number of restrictions may be placed on Shippers ability to operate effectively within the market. Trading/Termination – amend the UNC so that: trades between parent companies/subsidiaries and between Shippers that are part of the same company group are exempted from the existing Termination rules i.e. the transferee in such instances is not given the opportunity to take the capacity from a future date and all the capacity is recalled to be made available to the market (UNC TPD B & V). as above but trades between all companies exempted from the termination rules. Trading/Credit – amend the UNC so that where credit sanctions have been put in place due to insufficient credit, existing UNC sanctions are extended to include a Shipper trading their capacity to any another party – this will require changes to UNC TPD B & V. Credit/Termination - amend the UNC so that where credit is not put in place 12 months prior to the point of use of the capacity the Shipper may be terminated. This can be done by: switching on UNC TPD V 3.2.10 (a) & (b) so Shippers would incur a charge for not putting credit in place which could then be invoiced, if this is not then paid they could be terminated. amend UNC TPD V making termination the default position after both the 80% and 100% VAR notices are issued and not acted upon

Next steps.. NTS’s preferred outcome of this would be an industry driven discussion/solution and would like the industries view on whether: our initial thoughts are worth considering there are alternatives that would be worth exploring