Code Governance Review: WWU views on potential changes to UNC and the Modification Panel Simon Trivella – 30 th March 2010 Governance Workstream

Considerations Output from Code Governance Review Modification Proposals 0286/0286A Constitution of Modification Panel –Domestic and I&C Shipper Representation –Alternative Constitutional Recommendation Approach Voting Arrangements Extension of the Third Party Participant regime

Output from Code Governance Review Final Proposals –Same as the Initial Proposals? Initial Proposals (proposed A11 licence amendments) –[an independent] chairperson Approved by the Authority Casting vote –A consumer representative [approved by the authority] Has a vote as specified in the UNC –Code administrator assistance to small participants/ consumer representatives

Output from Code Governance Review –Panel recommendations to include; Detailed reasons for decision by Panel members Specific relevance as to better facilitation of the achievement of relevant objectives –Ability to revise and re-submit report to the authority following: additional steps additional Analysis additional information Next Steps –Await Final Proposals –Consultation on proposed Transporter licence amendments –Acceptance of changes by Transporters (20% & 20% rule) ? –Modification Proposals raised early to address output

Modification Proposals 0286/0286A Original 0286 –Consumer Representatives (two) to become voting members Advantages –Increases visibility of consumer interests (disagree) –Gives consumers a greater say in Modification Panel business (agree) Consumer Representatives would also be UNCC members and would be making decisions on matters not covered by this proposal, therefore inappropriate? –Brings UNC into line with best practice (disagree) Best practice happens elsewhere –Consistent with Ofgems Code Governance Review (disagree)

Modification Proposals 0286/0286A Alternative 0286A –Consumer Representative (one) to become voting member –Restricted to Modifcation Panel votes only (not other panel business, UNCC decisions or future Self-Governance arrangements) –Consumer Representative to be limited to NCC Advantages –Increases visibility of consumer interests (disagree) –Gives consumers a greater say in Modification Panel business (possibly) –Brings UNC into line with other industry codes (disagree, is this an advantage?) –Possibly consistent with Ofgems Code Governance Review (possibly)

Modification Proposals 0286/0286A Disadvantages / Issues (WWU view) –Consequential impact on the right of appeal under The Electricity and Gas Appeals (Designation and Exclusions) Order 2005 Not discussed as part of the CGR No justification provided for this –Does a Modification Panel vote deliver the benefits consumer representatives are looking for? A greater voice by becoming 1 out of 11 (or 2 out of 12)? –Other consumer organisations thoughts / views? –Differential treatment for the other non-voting members? –The core representative function of the NCC to provide advice to the regulator Is this therefore beyond their remit and a conflict of interests?

Modification Proposals 0286/0286A Alternative approach (tweaks) –Two tier voting (classes) All votes used for Panel Recommendation Code Signatories used for appeal mechanism This could be facilitated by UNC text: for the purposes of the paragraph 7(2) of The Electricity and Gas Appeals (Designation and Exclusion) Order 2005, the Modification Panel is…. Extend same provision to other non-voting members (apart from Ofgem)? Further Alternative Modifcation Proposals are no longer possible due to the 5 day rule –Any other alternatives would be a stand alone Modification Proposal

Constitution of Modification Panel Domestic and I&C Shipper Representation –Historically there has been a fair balance of representation By design? Not a formal part of the appointment / voting process –Imperative that Panel retains a balanced approach There are examples of Transporter / Shippers views on Modification Proposals Equal, if not greater, number of domestic and I&C views –Potential options (amongst others) Mandate fixed number of domestic and I&C representation (2:3 or 3:2) Mandate minimum of 2 domestics and 2 I&C representatives (5 th seat by standard voting) Move to 6 Shipper Representatives (3:3 domestic & I&C split)

Constitution of Modification Panel Domestic and I&C Shipper Representation –WWU supportive of all 3 options –6 Shipper representatives would require changes to retain the balance Additional Transporter Representative (not supportive) Weighted Votes (preferred option) –Simplest approach to have 5 votes per Shipper and 6 per transporter –Voting scenarios have shown this would retain the existing safeguards –Impacts of other proposals (such as 0286/0286A) would need to be considered –Options 1 and 2 could be facilitated through changes to Gas Forum process Next Steps –Further discussion and development with RG267 and/or Governance Workstream?

Constitution of Modification Panel Alternative Constituency Recommendation Approach –The vote only impacts on the right of appeal –Non-voting members included on Panel is consistent with Standard Special Condition A11(2) of the Transporter licence The network code modification procedures shall provide for…the consideration of any representations relating to such a proposal made by the licensee…and any other person likely to be materially affected were the proposal to be implemented –Other non-voting representatives equally materially affected All parties should be afforded the same opportunity (under All(2) of the licence)

Constitution of Modification Panel Alternative Constituency Recommendation Approach –Creation of Constituencies Transporters Representatives (5) (possible split of Transmission and Distribution) Shippers Representatives (5) (possible split of Domestic and I&C (as per previous slides)) Consumers Representatives (2) Independent Transporters Representative (1) Terminal Operators Representative (1) Independent Suppliers Representative (1) Panel Chairman (1) (required?) Ofgem excluded from process –Potential for 16 representatives from 9 Constituencies

Constitution of Modification Panel Alternative Constituency Recommendation Approach –Potential for 16 representatives from 9 Constituencies All Recommendations (or non-recommendations) recorded within the FMR Mechanism for an overall Panel view –Based on individual representatives? –Based on majority Constituency view? –Does it matter? –CC Appeal process retained as being based upon the Shipper and Transporter representatives views Contractual impacts within appropriate control of signatories No justification for change

Constitution of Modification Panel Alternative Constituency Recommendation Approach –Advantages Delivers aspirations of Ofgem (CGR) and NCC (our view!) Common approach for all Modification Panel representatives (apart from Ofgem) Promote greater interaction/participation from all affected parties better facilitates the achievement of relevant objectives (A11(9)(f)) –Disadvantages Non identified

Voting Arrangements Votes / Recommendations to include: –detailed reasons for decisions made by Panel members –supporting reasons –Specific reference to the relevant objectives Ability to vote for, against and to abstain –Reasons to be provided for all decisions (including abstention) Advantages –Clarity on basis of Panel decisions Current regime is only a measure of positive support and can be misleading –Non-affected parties not forced into being the arbitrator Disadvantages ?

Extension of the Third Party Participant regime Not [extensively] covered in Code Governance Review Current provision allows for Authority to designate TPP –Limited to UNC TPD Annex V1 (Table of Operational and Market Data) –NCC are the only designated TPP Potential for TPP to extend to other participants –CSO ? –Suppliers ? –MAMs ? –Terminal Operator ? Retain limits on affected parties and affected Section/part of UNC

Extension of the Third Party Participant regime Greater risk on non-signatory impact on UNC ? –Safeguards in place: Modification Rules remain robust Measured against Relevant Objectives Modification Panel / Code Administrator oversee process Potential application for CSOs (incl iGTs) to amend NExAs / NEAs ? Industry Concerns ?

Code Governance Review: WWU views on potential changes to UNC and the Modification Panel Simon Trivella – 30 th March 2010 Governance Workstream