Entry Capacity Transfers - Constrained Period Transmission Workstream, 7 Dec 06

Update UNC Modification Proposals 0118 and 0118a withdrawn 0118 did not allow transfers between zones 0118a sought to allow transfers between zones, but required further development The following outlines a potential process by which inter-zonal transfers could be facilitated……

Revised Transfers Process Step 1. Trigger for facilitating transfers After AMSEC, ASEPs classified for each month in following Capacity Year as one of following: Recipient Nodes (ReN)= Sold out ASEP* Donor Nodes (DoN) = Unsold out ASEP* If one or more ReN for any month, hold AMTSEC auction Process based on where there is a need for additional capacity, with AMSEC process used as last opportunity for shippers to obtain baseline *We could include a tolerance on definition of sold out/unsold out – but propose zero to simplify exchange rate determination process.

Revised Transfers Process Step 2. Pre-registration information User must register to participate in AMTSEC auction Pay application fee to cover costs State minimum and maximum amount of capacity desire at Recipient Node for relevant month Exchange rates only provided to Users who have pre-registered for a Recipient Node Differs from Ofgem proposal in that User does not need to indicate the donor node Application applies to participate in any AMTSEC auction round

Revised Transfers Process Step 3. Determine Exchange Rates, nodal maxima and release amount for auction round To minimise risk of increased buy back costs and set a single exchange rate for each Recipient:Donor Node combination, National Grid NTS will determine nodal maxima for each recipient node amount of unsold capacity from each donor node to be made available in each auction round Exchange rates valid if all unsold amounts released in that round allocated (within a tolerance) Principles to be contained within Capacity Transfers Methodology Statement

Revised Transfers Process Step 3 cnt. Determine Exchange Rates, nodal maxima and release amount for auction round. x:1 – means x units at DoN equivalent to 1 unit at a ReN Total Unsold Unsold in Tranche ReN1 ReN2 DoN1 20 10 1:1 DoN2 16 8 3:1 2:1 DoN3 30 15 0:1 ; DoN20 40 Maxima (GWh)

Revised Transfers Process Step 4. Publish AMTSEC Invitation – round 1 Only Users that have pre-registered their interest will receive the following information (& only for those Recipient Nodes for which they have registered an additional Capacity requirement) For each ReN for each month, National Grid NTS will publish: Single exchange rate for each DoN Reserve Prices (set at the same level as ReN AMSEC level) Nodal Maxima (to be updated after each auction round) For each DoN for each month, publish both: Total amount of unsold capacity Amount of unsold capacity available within that auction round Confirm Gas Day on which first auction round will be undertaken

Revised Transfers Process Step 5. AMTSEC auction Shippers able to place bids (volume, price) at ReNs for relevant months Bids are binding

Revised Transfers Process Step 6. Allocation Mechanism Translate all bids For each bid and each ReN:DoN combination, determine the price per Exchange Rate value (“Unit Price”) Rank all bids based on Unit Price to form one bid stack Allocate each bid in turn subject to Transferred capacity within tolerance [10%] of amount available at Donor Node in that round Amount allocated at Recipient Node does not exceed the Nodal Maxima at that node in that round Where two potential donor nodes to satisfy bid at recipient node can be satisfied by two or more donor nodes (i.e they have the same unit price), capacity will be transferred from the donor node with lowest Reserve Price first

Example – AMTSEC AUCTION Exchanges Rates Round 1 Total Unsold Unsold available in Round 1 ReN1 (B) ReN2 (C) DoN1 (A) 200 50 2:1 3:1 Nodal Maxima (GWh) for round 1 Allocation Process Bids Translated to A Capacity Transferred from Donor Node Capacity Allocation at Recipient Node V (units) P (p/unit) £Rev B 100 50 200 25 C 150 60 90 450 20 Volume must not be greater than a shipper has pre-registered Bids translated back to recipient node – allocated if total does not exceed ReN maxima Bids translated to each Donor Node based on exchange rate Ranked based on Unit Price Translated bids to be capped at maximum amount made available at Donor Node in round 1

Revised Transfers Process Step 7. Publish results Publish results of each AMTSEC auction round within [2] Gas Days Any transfers deemed to have met obligation to release at Donor Nodes Step 8. Further auction rounds If unsold capacity remains, capacity is still required at recipient ASEPs & the nodal maxima have not been reached, steps 3 to 7 are repeated Next auction round held [2 weeks] after closure of previous auction round to allow calculation of new exchange rates