Consideration of issues raised by UNC Modification Proposal 0244 23 July 2009

Background Reduced demand at DM Supply Points as a consequence of economic downturn Mothballed plant Reduced / curtailed production Current UNC rules limit opportunities for the reduction of Registered DM Capacity Concerns raised by Consumers at Gas Customer Forum UNC Modification Proposal 0244 (and 2 alternates) sought changes to UNC regime governing reduction of the Ofgem rejected all three proposals in May 2009 Decision letter “…it may be appropriate for GDNs to consider whether some form of transitional relief is appropriate…”, “…The industry may wish to consider whether…they wish to consider developing further proposals…”, “…We therefore consider that the GDNs should consider alternative solutions to target the potential problem identified…”

Proposed Approach xoserve ‘Rules and Options Analysis’ in progress Raise UNC Review Proposal – Convene Review Group Involves all UNC parties in consideration of whether change is necessary Requires participation of Users and consumers to accurately identify the scale and significance of the issue Opportunity to identify and collate evidence Ofgem identified that there was a lack of analysis in respect of the 0244 Mods Priority given to discussion and development of short term measures Xoserve’s analysis used as necessary Feedback welcome in respect of the scope of work: possible ‘transitional relief’ (short term). Focus on charging regime? UNC or other e.g. supply contract remedy? possible changes to the BSSOQ / ratchet regimes (long term) In respect of any solutions identified mitigation measures to prevent inappropriate behaviours likely impact of any changes on consumers affected likely impact of changes on other consumers charges (i.e. costs that are recovered from the rest of the GDN consumer base) the impact on investment decisions Raise UNC Modification Proposal if necessary (can be during course of group discussion)

Proposed timetable of events xoserve ‘Rules and Options Analysis’ request raised Publish proposed timetable to UNC Distribution Workstream Gas Customer Forum Raise Review Proposal at UNC Modification Panel. Identify and agree Terms of Reference (to include a requirement to Identify possible short and long term solutions). Convene group Review Report to UNC Modification Panel Raise UNC Modification Proposal (if required) Develop and implement process and systems solutions (if required) onwards 1st June 2009 23rd July 2009 27th July 2009 6th August 2009 December 2009 January 2010 Short term measures pursued as a priority (eg: UNC Mod)