Review Group 221: Review of Questions from Session 2

Review Group 221: Questions & Answers Scenario: QSEC auction, NGG NTS received bids for entry capacity which triggers incremental capacity. The incremental capacity bids tested against the Incremental Entry Capacity Release Methodology statement. A proposal is submitted to Ofgem and is not vetoed. Build commences but the Shipper terminates 1. What happens to the funded incremental obligated capacity? Following Shipper termination capacity reclassified as unsold funded incremental obligated entry capacity. Offered for sale under Paragraph 9(a) of Special Condition C8D of the Licence at the next applicable auction. NG receives the revenue driver for 5 years, if shortfall in auction revenue then recovery is via SO commodity charge.

Review Group 221: Questions & Answers Scenario Continued: 2. What happens to the project? NG may complete or terminate the project. The obligation to release the capacity remains. In the event that a site completes and requests a connection & capacity is sold NG is exposed to a buy-back risk.

Review Group 221: Questions & Answers 3. When does revenue recovery begin? NG makes an incremental obligated entry capacity proposal to the Authority. If it is not vetoed then the capacity is allocated to the recipient Shippers. NG will receive revenue following the start date of the Release Obligation either via invoices for allocated capacity (after its use) or, via the SO charge should there be a shortfall in the recovered revenue against that allowed from the revenue driver. 4. What happens when a Shipper has bid in an auction but defaults prior to allocation? In the event that a credit sanction is put in place the Shipper would be removed from the allocation process potentially effecting the outcome of the process.

Review Group 221: Questions & Answers 5. Should the Entry Regime include Novation rights comparable to those proposed in the Reformed Exit Capacity Regime? Can confirm that Novation rights have been proposed in the Exit Capacity Reform proposals (Modifications 116/195 + variants) These rights could be introduced at Entry however they are not considered to be part of this Review as this is concerned with the holders of capacity and their ability to fulfil their obligations. 6. Should Network Entry Agreements be part of this Review? National Grid NTS does not believe that this is necessary at this time.