UNC Modifications 061 & 062 – An Overview Transmission Workstream 03/11/2005

Background Winter Outlook Report identified the potential requirement for increased demand response for this winter. Demand Side Working Group has identified areas of development to facilitate greater demand side response being offered; Clear signal needed from National Grid NTS that demand response is likely to be required. Ability to offer demand response for multiple days (unable to turndown for short periods) Provision of a route for the residual balancer to get access to non-OCM gas

Gas Balancing Alert (UNC mod 062) GBA will be issued on D-1 where forecast demand is in excess of anticipated available supplies. Delivery effect of particular storage types will be removed from the anticipated available supplies assessment when stock levels are within 2 days of the Safety Monitor levels (at max export rates). GBA, once issued, shall remain in force for the duration of the Day.

Gas Balancing Alert (UNC mod 062) GBA within day option. Implementing the option would give National Grid NTS the ability to issue a GBA within the Day where: There is an event that National Grid NTS anticipated will lead to an end of day supply loss in excess of 25 mcm and; The anticipated supply loss subsequently results in the remaining anticipated available supplies being less than or equal to forecast demand. Views are invited on this option…..

Facilitating further demand response (UNC mod 061) Where a GBA is issued, Eligible Balancing Actions by National Grid NTS may include; Offers taken from OCM with Trading Participants. Offers taken OTC with non Trading Participants. Offers taken from either source that are effective for up to 7 consecutive days including D.

Effect on SAP and SMPs SAP SMP Continue to include all OCM trades (except Locational) Also includes Eligible Balancing Actions taken by NG NTS through OTC contracts Publication via National Grid systems as now plus working with OCM operator to investigate other options. SMP Set by Eligible Balancing Actions either on OCM or OTC Inc. multiple day trades

Effect on SMPs Where a multi-day trade is accepted, each component Day will contribute into SAP, SMPs and Balancing Neutrality based upon the Residual Balancer assessed probability of the gas being required by the Total System on the subsequent days. % of price applied = Preq x (Preq / Sum(Preq)) Effective Price (used in SMPB) = % of price applied x p/kWh x No Days Examples are set out in the Proposal and on next slide.

Example National Grid NTS accepts a six day, multi-day offer (buy) for 200 kWh per day at 10p kWh, Total Cost = 12000p, Total Volume = 1200 kWh. D1 D2 D3 D4 D5 D6 Probability of Requirement 100% 20% 5% 0% % of price applied 80% 16% 4% Effective Price (used in greater of SMPB calculation) 48p 10p 2p Effective Volume (used in SAP, volume defined in this row * original trade price (10p) 960 kWh 192 kWh 48 kWh Balancing Neutrality Charge 9600p 1920p 480p

Timetable Sent to Ofgem requesting Urgency 01/11/2005 Ofgem grant Urgent status 02/11/2005 Proposal issued for consultation 07/11/2005 Closeout for representations 21/11/2005 FMR issued to Joint Office 24/11/2005 Panel Recommendation 01/12/2005 Ofgem decision expected 05/12/2005 Is a special Workstream meeting required?