Modification Proposal 0283 Update Chris Warner

Background Modification Proposals 0244, 0244A, 0244B Raised in March 2009 to alleviate issues created by economic climate Rejected 20 May 2009 Review Group 0264 July 2009 – January 2010 Convened to identify short term (interim relief) and long term options Urgent Modification 0275 Raised November 2009 Implemented December 2009 Modification Proposal 0283 Raised March 2010 to reflect Review Group 0264 identified possible long term measure

Modification Proposal 0283: UNC Change Process Position Raised 9 March 2010 Considered by Modification Panel on 18 March 2010 Various concerns identified by Panel Members and Ofgem referred to Distribution Workstream Workstream Report due to Modification Panel on 20 May 2010

Modification Proposal 0283: Issues Ofgem comments from 0275 decision letter “…we note the GDNs intent to propose a more enduring solution…we would encourage industry to examine more closely the effects of any further modification” “we expect that the industry will undertake more comprehensive analysis on the likely impact…not only on those customers affected, but also on other customers’…[to] demonstrate that any enduring changes would not lead to inappropriate increase in the overall share of costs that are recovered from the rest of the GDNs’ customer base.” “…we encourage…[consideration of] whether the current capacity commitments placed on users are adequate in light of the UNC objectives…[and] to examine whether there are any benefits to aligning the reservation of network capacity by customers with GDNs’ reservation of capacity on the NTS. Consistencies in this area may increase the efficiency of capacity bookings.”

Modification Proposal 0283: Issues Does the proposal as drafted contain sufficient demonstration of need and analysis of impacts? Possible inconsistency with Capacity User commitment principles applicable to NTS Exit Capacity regime Are the resultant capacity commitments appropriate? Does the proposed regime encourage the appropriate behaviours? Does the proposed regime contain the appropriate capacity commitments?

Modification Proposal 0283: Issues Ofgem response to application of Scotland Gas Networks to re-open the current Gas Distribution price control - interruption reform re-opener …we originally recommended that SGN should explore the possibility of reaching a commercial agreement with customers to encourage them not to overstate their SHQ …however we consider that this has highlighted an issue that the GDNs need to consider and review. We are concerned that the existing charging and contractual arrangements may not place appropriate incentives on customers to declare accurate SHQs …if customers do not have appropriate incentives to consider the level of SHQ they require, this could lead to over investment in the pipeline system. Need to review elements of LDZ Capacity regime the outcome of which is unclear Inappropriate to initiate changes which may be inconsistent with the outcome of any review

Modification Proposal 0283: Proposed Next Steps As proposer, NGD intends to seek a deferral at the Modification Panel on 20 May 2010 To address the issues raised 0275 effective for the forthcoming winter Pending the outcome of any future review of the LDZ exit capacity regime