Demand Estimation Impacts 25/2/10

Why demand estimation processes impact Shippers Most Shipper organisations prefer to be able to take action to mitigate risk This may be to de-risk the business by removing areas of risk Or it may be to take enabling actions to mitigate impacts Either way we prefer to not be in the situation of having potentially large risks that we cannot take action to control

Before the Day Before the day Shippers will forecast expected volume of gas and will take hedging actions to determine an appropriate purchasing strategy to minimise costs and risk This may be to fix at a known price as this allows the impacts to be crystallised and as such decreases risk Minimising risk is not the same as minimising cost – in some cases certainty is preferred over potential cost savings However, actions are possible

Allocation uses parameters from the demand estimation process that are optimised over the year Shipper risk is not concentrated in the winter – there can be price differential and volume movement at other times too Monthly variability is an issue – changing CWV parameters that decrease fit in the summer is not a help, and summer variability is an issue There is a limit to action we can take to mitigate risk Errors are seen as reconciliation which cannot be managed or hedged for On the Day 03 May 2019, E.ON, Page 4

Summer Impact Summer variability has potentially large impacts as forecast errors will be larger over this period CWV behaviour with the cut-off does not match demand behaviour and there will be a mismatch between forecasting for allocation and customer billing Current Demand Estimation procedures look to optimise over the year and this does not target key problem areas – the incentive to assess is not present in the current system 03 May 2019, E.ON, Page 5

Summer SF Impact Large variance over summer SF spread across LDZ – response on non profile related is unconvincing For both NW and WM, in the October sub-period NDM demand was significantly depressed during this sub period. This was the half term weekend as well as being unusually warm – this is the case for other parts of the country too 03 May 2019, E.ON, Page 6