UNC Transmission Workstream 7th December 2006 Summary of National Grid Enduring Exit Consultations - ExCR and Gas Charging UNC Transmission Workstream 7th December 2006

National Grid NTS Consultations ExCR “User Commitment” Flexibility areas and zones, and associated limits GCD 01 – NTS Exit (Flat) Capacity Prevailing NTS Exit (Flat) Capacity Reserve prices for annual and daily auctions GCD 02- NTS Exit (Flexibility) Capacity and Commodity New SO Flexibility Commodity Charge Rate Revised SO Commodity Charge Rate GCD 03 – Under/over-recovery mechanisms

Industry Responses Received Respondent ExCR GCD01 (Flat Capacity) GCD02 (Flexibility) GCD03 (Revenue Recovery) E.on ü Statoil UK Scottish and Southern Energy EDF Energy RWE npower The Association of Electricity Producers (AEP) International Power Scotia Gas Networks National Grid UK Distribution Wales & The West Utilities

ExCR- General comments In making responses, many respondents recognised uncertainty of: Licence obligations - default lead times, obligations and incentives UNC Mod Proposals Charging Proposals Responses made without implying support for exit reform

ExCR - User Commitment Responses Proposal Response 4 year commitment for increases in capacity Against - Preference for 1 year, consistent with Langage and Marchwood determinations Why need for increase? -Option 1; or -Option 2 Option 1 – Recognised simplicity, but not preferred Option 2 – Preferred option (by 5 of 7) Option 3 – NGD propose new option where prices fixed at time of application Link to ARCAs? Reduction notice period Against - Concern over rigidity of process (14 months and Oct effective date) leading to potential capacity sterilisation - call for ability to reduce earlier if “efficient and economic”

ExCR - Flex Responses Proposal Response Flex zones and areas Broad support as pragmatic starting point Flex limits Best place for limits? Methodology for update?

GCD01 - Flat Capacity Charging Proposed Changes and Responses Initial Change Proposal Response Transcost or Transportation Model 9:1 Support for Transportation Model Interruption Payments removed No comments No adjustment of capacity charges to recover allowed revenue Flat charges would recover approximately 45% of TO Exit Costs. Against – would like to see charge adjusted (or scaled) to recover majority of allowed TO Exit Revenue No capping of annual price movements Support Removal of zones for NTS/LDZ offtakes

GCD02 - Flex Capacity & Commodity Charging Proposed Changes and Responses Initial Change Proposal Response Reserve price equal to 0 p/kWh, consistent with principle that there has been no specific NTS investments for flexibility capacity Support – although some not in support of the product Applicable Flex SO Commodity Rate proposed to be set at common rate for all zones – Based on proportion of relevant SO costs considered appropriate to target to within day flow variations Against Do not agree that a charge should be levied (or in some cases, that the product should be defined Over complex – don’t understand requirement Some support for zero price and monitoring Applicable Flat SO Commodity Rate Set to recover of 50% of allowed SO revenue net of flexibility commodity charges Support Support for single adjustment ratio i.e. initial flat/flex price ratio maintained in the event of over/under recovery

GCD03 - TO Over/Under Recovery Proposed Changes and Responses Initial Change Proposal Response Under Recovery TO Exit (Flat) Commodity Charge Would be deigned to recover residual TO Exit (50%) revenue after TO Exit (Flat) & (Flexibility) Capacity auction outcome Support subject to flat capacity charges being adjusted first Over Recovery Exit Buy-back offset mechanism Excess revenue would be used to offset an entry buy-back scheme should such a scheme be introduced (Analogous to PC65 Entry mechanism) Negative TO Exit (Flat) Commodity Charge Would be deigned to redistribute residual TO Exit (50%) revenue after TO Exit (Flat) & (Flexibility) Capacity auction outcome Some support for exit but-back offset mechanism: recognise that it would not be applicable if there was no buy-back incentive mechanism

Way Forward National Grid considering responses and potential changes to its initial views Desire to consult on final proposals after Ofgem decisions on 0116 + alternate UNC Mod Proposals GCM01 Capacity charging proposals If not possible due to time constraints, consultations will be undertaken based on stated assumptions