Options for structuring DM arrangements 29 January 2012

Broad Demand Management (DM) choices Interrupt: ie call for interruption of whatever interruptible arrangements are in place (applies only to Vector) Buy-back capacity: ie reduce the amount of reserved capacity in the congested area by buying it back and leaving it to retailers to manage arrangements with their customers (applies only to Vector) Buy curtailment: ie pay end users to reduce their demand, either directly or through their retailers, but do not alter the amount of reserved capacity (could apply to both Maui and Vector) Choices can be put into effect in different ways: Interrupt: arrangements must be dealt with in VTC and related contracts Buy-back capacity: arrangements could be dealt with in VTC or largely outside VTC Buy curtailment: arrangements could be dealt with in codes or entirely outside codes Gas Industry Co

1st option: Individual DM arrangements in codes… Interrupt Buy-back capacity Buy curtailment Buy curtailment MPOC modified to include DM arrangements VTC modified to include DM arrangements Considerations: If buying back capacity or buying curtailment, pay-when-used charges could apply ie shippers pay only when service is provided Possible CC complications over tariffs and accounting?

2nd option: Individual DM arrangements outside each code… MPOC VTC Buy-back capacity Buy curtailment Buy curtailment Maui DM arrangements Vector DM arrangements Considerations: DM arrangements sit outside the regulated entities (avoids possible CC issues) DM arrangements managed by independent party but ‘called on’ by TSO as required Either all shippers/TSO can ‘opt-in’ or DM arrangements can be regulated Funding by compulsory ‘insurance premium’ or industry levy

3rd option: Single DM arrangement outside codes… MPOC VTC Buy curtailment Joint DM arrangements Considerations (in addition to considerations on previous slide): DM arrangements would need to allow for different ‘insurance premiums’ to apply to each pipeline