EU Balancing Code – Mod 494 Imbalance Charge Amendments EU Workgroup 1st May 2014

Content EU Gas Balancing Code sets out the imbalance charge calculation GB scheme is mostly in line with the EU Code. However, there are changes required for setting: - SMP Buy Price SMP Sell Price 2

UNC v EU Balancing Code UNC EU Balancing Code SMP Buy = max {SAP+ default differential or highest price balancing trade} SMP Sell = min {SAP - default differential or lowest price balancing trade} SMP Buy = max {SAP+ adjustment or highest price balancing BUY} SMP Sell = min {SAP- adjustment or lowest price balancing SELL}

Options Description Pros Cons 1) No change No cost Not EU compliant - open to infraction proceedings/fines 2) Change to EU definition Compliant Straightforward Shippers with an imbalance in the direction that is “helping” are cashed out close to SAP Needs Mod and system change Changes in behaviour would need to be monitored 3) Change to EU definition + increase default differential Compliant. Shippers incentivised to balance regardless of market / system length Needs mod and system change – beyond EU requirement Need to consult on default methodology changes

Proposed Change to Match EU Definition 1.2.1 Subject to paragraphs 1.2.2 and 1.2.5, for each Day: (a) the "System Marginal Buy Price" is the greater of: (i) the System Average Price plus the Default System Marginal Price; and (ii) the price in pence/kWh which (subject to Section D4.1.4, 4.1.5(a)) is equal to the highest Balancing Action Offer Price in relation to a Market Balancing Buy Action taken for that Day; (b) the "System Marginal Sell Price" is the lesser of: (i) the System Average Price less the Default System Marginal Price; and (ii) the price in pence/kWh which (subject to Section D4.1.4, 4.1.5(b) and 4.1.7) is equal to the lowest Balancing Action Offer Price in relation to a Market Balancing Sell Action taken for that Day;

Any questions Please contact me on 01926 653233 or deborah.brace@nationalgrid.com 6