UNC Modification Proposal 0385 Inclusion of DNOs as Users in User Pays Arrangements Phil Lucas 7 June 2011

User Pays Arrangements GDPCR 2008-13: advocated specific funding arrangements for certain Transporter Agency services Targeting costs on those that utilise the service Incorporated in SSC A15 of NTS/DN Licence UNC Modification 0188 (implemented 9 April 2008) – inclusion of Agency Charging Statement into the UNC UNC Modification 0213V (implemented 7 April 2009) – User Pays Governance Arrangements No specific contemplation that a DNO would be a User of a User Pays Service

Issue Subsequent industry developments have occurred whereby it may be appropriate to apportion User Pays costs to DNO Users As a unique beneficiary, or As part of a broader group of ‘Users’ (DNOs and Shippers) Current UNC Modification Rules do not facilitate apportionment of costs to DNO Users Development of NTS Exit Capacity arrangements / services may warrant specific allocation of costs as described above For example UNC Modification Proposal 0381 ‘Removal of the NTS Exit (Flat) Capacity “deemed application” process’

UNC Modification Rules Para 2 Interpretation, 2.1 Defined Terms "User": for the purposes of these Rules, references to a User in the context of an Individual Network Code Modification Proposal includes a Relevant Shipper and in all contexts excludes a DNO User. Para 6.2 Content of Modification Proposal 6.2.5 A User Pays Modification Proposal shall… (c) where it proposes that Users pay a proportion of the Implementation Costs, contain: (i) an apportionment of the Implementation Costs between Users and Transporters; and (ii) an apportionment of the Implementation Costs between Users;

Example of Application UNC Modification 0224 “Facilitating the use of AMR in the Daily Metered Elective Regime 6.2.5(c)(i) - 100% User (shipper), 0% Transporter 6.2.5(c)(ii) – User (shipper) eligible Meter Point market share for development costs. Per election for operational costs UNC Modification Proposal 0248 “Meter Reading Replacement” 6.2.5(c)(i) - 75% User (shipper), 25% Transporter 6.2.5(c)(ii) – User (shipper) NDM capacity market share for development costs. Per reading replacement for operational costs

User Pays Guidance Document Page 4 – “Background” “…under limited circumstances, a Modification Proposal may be classified as a User Pays Modification Proposal with a 100% cost allocation to the Transporters. An example of when this may occur is when the Transporters are classified as a User within the relevant section of UNC.” Page 5 – “Definitions” User – [as per] UNC MR2.1

DNO as a User Enduring NTS Exit Capacity Arrangements (Modification 0195AV) TPD Section B – System Use and Capacity TPD Section J - Exit Requirements TPD Section K – Operating Margins TPD Section S – Invoicing and Payment TPD Section U – UK Link Parts of TPD Section V – General TPD Section Z – Storage (where DNO is a storage user)

Proposal Expand current definition of “User” within UNC Modification Rules to include DNOs where a User Pays Modification proposes allocation of User Pays costs to a DNO User Benefits: enables a proposer of a User Pays Modification Proposal to ‘legitimately’ propose allocation of costs to a DNO User facilitates transparent allocation of User Pays costs aligns UNC Modification Rules to scenario envisaged within User Pays Guidance Document No implementation costs

Consequences of Non-Implementation UNC Modification Rules would not facilitate proposed allocation of User Pays costs to DNO Users User Pays Costs not able to be transparently allocated User Pays Guidance Document remains inconsistent with the UNC Modification Rules

Next Steps Modification Panel on 19 May 2011 determined as Self Governance Determination Date identified as 15 September 2011 Suggested legal text provided within Proposal Development of Workgroup Report – to be issued to Modification Panel by 15 September 2011