Proposed Environmental Incentive

Background In its recent SO Incentives Final Proposals, Ofgem stated that it planned to introduce a ‘methane incentive’ Ofgem has asked National Grid to come forward with proposals for an NTS environmental incentive (relating to methane venting) to apply from 1 April 2008

Proposals Process National Grid are launching an industry consultation on initial proposals on 2 May and requesting responses by 30 May Ofgem will then use these responses to inform its Final Proposals

Proposed Incentive National Grid exposure to the environmental costs, through an adjusted shadow price of carbon, of venting methane during depressurisation of NTS Compressors. This will ensure that the total costs are factored into National Grid’s decision process on whether to depressurise a compressor or whether to incur the ongoing costs of holding a unit pressurised If National Grid can reduce vented volume it would gain under the incentive, if volumes increase then it would lose

Publication of proposals Initial Proposals document will be available on National Grid’s website by 2nd May http://www.nationalgrid.com/uk/Gas/soincentives/ Register for the SO incentive email circulation list soincentives@uk.ngrid.com We will be asking the Joint Office to circulate a link to the Initial Proposals document

Review of SO Incentives from 09/10

Development of SO Incentives Building on the SO incentives process introduced last year, Ofgem has asked National Grid to lead this process from the beginning Following feedback, this year National Grid will be looking to engage earlier with the industry Further information on the plan for this year will be brought to the June workstream meeting