Erika Melén, Senior Settlements Analyst Modification Proposal 141a UNC Distribution Workstream – 24th May 2007

Why have E.ON raised this alternative proposal ? (1) Appreciate and support the reasons for Mod 141 and the implications of unresolved USRV Especially concerned about the implications that long term debit USRV have on the RbD market Mod 141 has an objective of clearing aged USRVs, but the mechanism proposed, as drafted does not promote this EoN 24th May 2007

Why have E.ON raised this alternative proposal ? (2) Concerned that increasing the liability cap would fail to address current behaviour and would continue the present risk to the RbD market Increased liability would also make the incentive arrangement punitive Performance in terms of absolute numbers of outstanding USRV has been reducing since the beginning of this year however the number of long term unresolved USRV remains a problem – Mod 141 does not recognise this behaviour EoN 24th May 2007

What are the key differences in E.ON’s alternative proposal? The monthly liability payment due for unresolved USRV substantially increases over time Liability payments increase for every year in which a USRV is outstanding to a maximum of £500 per month The administrative element is increased to 2.5% from 2.0% The current cap is maintained Why is this a preferable mechanism? Appropriately incentivises shippers, without being penal in nature Targets those shippers who may be “gaming” their USRV resolution Incentivises shippers in a way that should reduce the risk to the RbD market ** Future consideration of “unresolvable” USRV?? EoN 24th May 2007