Overview of RbD Risk Modelling 31 March 2008 Review Group 177 Overview of RbD Risk Modelling 31 March 2008

RbD Risk Modelling – Background Purpose Risk Modelling supported the introduction of RbD (Reconciliation by Difference) in 1998 Designed to be one of the operational “monitors” of RbD How Defined “Risk” as the difference between actual gas bills and those estimated by RbD Estimated month on month variability of RbD Charges based on assessment of inherent risk factors Periodic updates were shared with the RbD Sub-Group

Risk Model - Results Risk Model showed that RbD was less variable than Meter Point Reconciliation Base model showed variability of +/- 1.3% of allocation Indicated variation with errors/timing differences included: +/- 2.5% Predicted variation increased/decreased between updates Actual variation can be up to 5% of allocation Last update provided 2002 Risk Model superseded by RbD Feeder Model and RbD Forecasting

Variability of SOQs 31 March 2008 Review Group 177 Variability of SOQs 31 March 2008

Variability of SOQs SOQ = AQ PLF * 365 PLF = Peak Load Factor Measure of peakiness of annual demand in an EUC – what proportion of AQ would be used on a 1 in 20 peak day Set each year for each EUC as part of NDM Capacity Algorithms Determination of PLF EUCs 1 to 4: determined directly from the NDM Modelling – extrapolating modelled demand to the 78 year 1 in 20 CWV EUCs 5 to 9: determined from the NDM Modelling using a Weather Correction Factor derived from the DNs forecast 1 in 20 Peak

Variability of PLFs Gas Year 05 to 06 “B” band EUCs only – excludes WAR bands

Variability of PLFs Gas Year 06 to 07 “B” band EUCs only – excludes WAR bands

Variability of PLFs 2006/07 to 2007/08 WAR Band variability Gas year 05 to 06 – 100% of WAR Band PLFs changes in range -3% to +3% Gas year 06 to 07 – 96% of WAR Band PLFs changes in range -3% to +3%

SOQ Amendment Options PLFs are available by end of August (latest) for coming Gas Year, following industry consultation Under rolling AQ rules, AQ may have recently updated Options for NDM SOQs: Restate all SOQs on 1 October, regardless of recent AQ changes Leave SOQ unchanged, will update at next AQ change Update SOQs based on read frequency – only amend Annually Read sites – Monthly Read will get reads and update soon Update SOQs based on read history – if reads are frequent and AQ updates regularly, don’t update SOQ Considerations: Shipper comparability, differing read performance, Transportation revenue/costs, system processing, system capacity requirements