Exit Overruns in the Enduring Regime Transmission Workstream – 1st July 2010

Exit Overruns – Background Under the enduring regime Users are incentivised to procure sufficient Exit Capacity to cover their offtake requirements: Overrun charges Based on similar principles to Entry, other than aggregate position at exit point taken into account where multiple capacity holders exist Deemed application for Enduring Exit capacity This presentation focuses on the deemed application principles only UNC TPD B3.2.25 “Where a User incurs an Overrun charge on a quantity greater than 100,000 kWh in any 12 month period (ending March 31st) they are deemed to have made an enduring application in the following July window (effective Y+4) for the highest overrun quantity for that User at that exit point in that 12 month period”

Simple illustration note, graph is not to scale The above shows a simple illustration of how the deemed application principles will work A User overruns twice at an exit point in the period April to March, and is charged for both occurrences via the overrun charge mechanism In addition to the overrun charges, the highest overrun quantity translates into an application for an increase of enduring exit cap equivalent to the overrun quantity, effective from Y+4 Enduring entitlement increases accordingly from Y+4

More complex illustration note, graph is not to scale The above shows a more complex scenario where the User overruns (and is charged for all overrun instances accordingly) in two successive 12 month periods by the same highest quantity This results in two separate deemed applications (i.e. one for each year) As a result, a cumulative enduring application, equating to the highest overrun in year 1 plus the highest overrun in year 2, is seen User committed to higher level of enduring capacity for up to 4 years from Y+5

Way forward NG NTS is seeking views as to whether: this an unintended consequence of the deemed application business rules? Warrant change or leave as-is? High level potential solution: Utilise highest historic overrun of User as benchmark to measure against? Hence cumulative effect of deemed applications is 40 as apposed to 110 if left as-is talk around: other solutions have been explored but complex, this solution is in keeping with original principles of the deemed application process