Commercial Arrangements For Gas Quality Service – Introduction UNC Transmission Workstream 23rd April 2007

Background In October 2006 Ofgem established two industry workstreams to consider: how likely it was that the gas flowing to GB in the future would be of a quality that was outside of that allowed to flow onto the British network; and the most appropriate regulatory treatment for any gas processing facility required to treat gas to ensure that it is within the GB specifications. Ofgem published the conclusions from the workstreams on the 30 January 2007.

Scenarios Workstream Output Great deal of uncertainty on the need for a gas processing facility.

Economic Regulation Workstream Output

Work in Progress “Ofgem to initiate a process of consultation on the changes to NGG's gas transporters licence necessary to support the proposed approach and for NGG, or others, to raise any required modifications to the Uniform Network Code.”

Assumptions NGG will carry out feasibility studies only after being approached by an interested party. The feasibility study will be paid for by the interested party. NGG will offer services to the market via an open season process based on information from the feasibility study. The UNC Modification proposal will be developed on the basis of the hybrid 2 model i.e. the plant is built based on User commitment and NGG has an opportunity to build above User signal GS(M)R limits are unlikely to be amended before 2020.

Proposed Way Forward on UNC Modification Many elements of the potential service need to be developed with industry participants before a Modification Proposal can be raised e.g.: definition of the service ("gas quality product") registration mechanisms (how and when a UNC User can apply for the gas quality product) charging arrangements (what a UNC User would pay and when) liability arrangements (user's rights if purchased product not available) Our intention is therefore to begin this process today by suggesting a process & timeline for resolution of these issues and development of a UNC Modification Proposal. In addition we intend to begin to explore some of these issues today.