FR-UK-IE Regional Initiative Cross-Border Balancing Procurement State of progress SG July 2008 Jean-Philippe Paul - John Prime

Summary  NGET-RTE proposal : main aspects  ERGEG Consultation conclusions  Interim solution : state of progress  Enduring solution : perspectives

Process 23:00 All times approximate GMT D-1 D Y-1/M-1 Start 07:45 01:00 23:00 IFA Contract Day Secondary Mechanisms Re-Alloc’n/Assign’t 06:00 LT Transfer Nomination New Reciprocal Balancing Arrangements NGET and RTE formulate balancing offers in D+xh timescales, only after all commercial intraday nominations have been completed following the respective Interconnector Intraday gate closure (Day Ahead Nomination) UIoSI rule implemented for unused LT capacity 03:0005:0007:0009:0011:0013:0019:0021:0017:0015:00 XX:00 13:00 UIoLI rule implemented for unused DA capacity XX:00 * 12 Intraday Gates illustrated See next slide etc Rolling hourly pricing of SO-SO balancing offers for service delivery at x+1h. Offered prices based on those in the deliverer’s domestic BM. User capacity rights and volumes unaffected

Timing Illustration 04:00 05:00 06:0007:00 08:00 Interconnector Intraday gate closure Period of activation Delivery period BM Services can only utilise unused and available interconnector capability following each intraday gate closure. TPA capacity allocation mechanisms in all timescales not impacted by balancing service actions. Formulation of balancing services offers Publication of prices

Activities Pre Gate Closure: Normal TPA access arrangements TSOs may NOT reserve IFA capacity At Gate Closure (H-1 intraday): Market participants submit final notifications, nominations and BM bids/offers Participants may no longer trade over the IFA TSOs calculate residual IFA capability Post Gate Closure: TSOs calculate and exchange inter-TSO balancing bids/offers TSO bids/offers are published TSOs notify bid/offer acceptances Delivery of accepted volumes Details of TSO transactions are published

Pricing and Volume Principles  Prices submitted close to GB Gate Closure  Prices Curve  Different prices for different tranches of volume  Prices will be cost-reflective and will reflect forecast conditions in real time  Market Imbalance  Bid and Offer prices available in BM  Transmission constraints  Volume will initially be limited to 500MW  To be reviewed after a suitable period of operation (initially proposed as 1 year)

Interim (Hybrid) Solution  Manual work-around based on current BASA  Significantly increased functionality  TSOs exchange 6 prices at day-ahead stage  Price windows correspond to current intra-day gate closure in French market (subject to availability of IFA capacity)  National Grid will have ability to re-submit prices intra-day  Price exchange and acceptance based on present arrangements  Implementation targeted for August 2008

Summary – Enduring Solution  “Real Time” Balancing, after IC Gate Closure  Hourly prices, set 1-hour before delivery  Price Curve – prices in 100 MW tranches  Prices influenced by anticipated real time energy and transmission issues  Volume - initially maintain current 500 MW cap  Implementation targeted for July 2009

ERGEG Consultation  Consultation Oct 2007 – 20 Nov 2007  Comments by :  EirGrid,  Moyle,  EDF,  EURELECTRIC,  EDF Energy  Centrica  Regulators conclusions published 15 Apr 2008

ERGEG Consultation  Conclusions set up by regulators  TSOs’ proposal allows reciprocal access to BMs, with benefits identified as opportunities, competition, imbalance price reduction, preserved security  First step towards greater integration  Proposal broadly welcomed in responses  Follow-up on main remarks :  Reduce tranche size to 50 MW  Differences between impacts on imbalance price result from different market arrangements and do not have to be suppressed; TSOs proposal validated  500 MW cap is a sensible approach  Remuneration of interconnector operators for use of infrastructure needs to be considered

Interim solution : state of progress  After the regulators’ approval of the proposal  RTE and NGET launched “BALIT Project”  Acronym for “Balancing Inter TSO”  First : they launched the requested tasks to set up the Interim solution  1- Evolution of the operational process  2- IT evolutions  3- BASA contract evolution  Tasks 1 and 2 are complete, 3 in progress.  TSO preparations on target for Sep-08 commencement

Interim solution : state of progress  But a difficulty appeared quite lately :  Some of the French BM Rules do not authorise to set up the solution  There is no practical solution to authorise NGET to formulate bids on the French BM  After in-depth analysis by Regulators and TSOs, the conclusion is that the unique solution is to modify Rules  A process of Rule modifications (covering BALIT and many other questions) is engaged since May 2008  Target : New Rules should be approved Jan 2009  >> The Interim solution will start after new French BM Rules approval by CRE  NB : these new Rules will be convenient also for Enduring solution

Enduring solution : perspectives  NGET and RTE have started preliminary studies  Technical solution for information exchanges  Operational process  Still in progress  Enhanced planning should be available in Nov 2008