EU Workgroup – Mod 500 WG(4) – 16 th September 2014

Surrender Cash Flows 2

CMP cash flows for Surrender & LT UIOLI - Proposal  Surrendered and LT UIOLI offered in an auction will have their own quantity holders in the Gemini system.  This means revenue received from Surrenders/LT UIOLI can be identified and treated separately from standard baseline or incremental revenue sales.  Same principles applied to CMP surrender and LT UIOLI as are applied to TnT.  Costs/Revenues will not be counted in National Grid’s SO or TO actual or maximum allowed revenue.  Also will not be included in Constraint Mgt Incentive. 3

CMP cash flows for Surrender & LT UIOLI - Proposal  Debit paid by a User will be a relevant revenue to capacity neutrality.  Credit received by a User will be a relevant cost for capacity neutrality.  User Debit ≥ User credit  zero impact or net revenue to neutrality.  Any net revenue will be redistributed to community via neutrality mechanism.  This means net revenue from an Exit transaction will be redistributed through neutrality (based on entry holdings).  NG will always be cost/revenue neutral.  NG will monitor Exit costs/revenues going through neutrality. 4

Surrender Price 5

Slide presented to WG(1)  Allocate bundled results first:  Unsold > Surrenders > LT UIOLI > Oversubscription  Then allocate unbundled results:  Remaining unsold > remaining surrenders > remaining LT UIOLI > remaining oversubscription  This way all unsold must be used before re-allocating surrenders; all surrenders before LT UIOLI; and all LT UIOLI before non-ob. unsoldSurrenderLT UIOLINon-Ob USLO  Auction results come back from PRISMA. - Bundled bid demand - Unbundled bid demand

For 1:2 situations  There are 2 possible clearing prices for the bundled auctions.  This means that, if the Surrender is re-allocated to meet demand from a bundled auction, there are 2 possible prices that can be credited to the surrendering shipper,. 7 unsoldSurrenderLT UIOLINon-Ob USLO - Bundled bid demand – bundled auction A (5p) - Bundled bid demand – bundled auction B (3p)

Surrender - minimum quantities 8

Minimum Surrenders – PRISMA feedback  Fundamental functional changes  New ‘conditionally available’ type of auction and process for handling the surrenders would have to be developed.  Enhanced Surrender functionality (and possibility of PRISMA storing Surrender data).  Auction publishing would be amended  Process would need a lot of multi-lateral discussion e.g. Impact on adjacent TSO if Available capacity dropped.  Would auctions be re-run without conditional amount, if the minimum amount is not met. Could impact timetable for auctions.  Long term auction could jump from undersell back to oversell if a Surrender offer dropped out.  Non-competing auctions could move into competition.  Competition tree algorithm is already complex 9

LT UIOLI Guidance Document 10

LT UIOLI Guidance Document v2.0 draft 11

Contingency 12

13 Background - Existing Arrangements  Section U – UK Link  U b) – Code Contingency is specifically defined as an event or circumstance affecting UK Link.  PRISMA not part of UK Link  Where a Code Contingency continues for a certain period of time then it may be a Class A Contingency  Under Class A Contingency then standard arrangements under TPD may be amended.

14 Class A Contingency (existing) - Capacity  Section B 2.16  2.16 a) Where…no capacity allocations of Daily NTS Entry Capacity in respect of a relevant Day are made…the System Entry Overrun Charge payable by Users…will not apply.  2.16 b) and c) relate to Contingency Arrangements for relevant processes (Registration, Surrender, Trading). NG still require system (Gemini) access to enact these arrangements on behalf of shippers.  PRISMA is a web based system so not possible for NG to have system access if other parties do not.

Contingency Arrangements  Wait and See approach initially;  Do not declare contingency unless outage is prolonged.  If Gemini offline, and Code Contingency declared:  NG can manually upload available capacity to PRISMA.  From shipper perspective auctions will continue.  If PRISMA offline:  Long term auctions will be held when system back online.  Short term auctions will recommence when system back online.  Existing Class A Contingency under 2.16 a) to be applied if outage is prolonged. 15

Recap 16

Summary of Topics covered so far  Long Term Auctions – Ascending Clock (WG1 & 3)  Short Term Auctions – Uniform Price (WG1 &3)  CAM auction products (WG1 & 3)  Joint Booking Platform – PRISMA (WG1 & 3)  1:2 situations & Competition (WG1 & 3)  Available Capacity & Bundling (WG1)  CMP: Surrender (WG1 & 3)  CMP: LT UIOLI (WG1)  Transfers (WG1 & 3)) 17

Summary of Topics covered so far (2)  Scalebacks & buybacks (WG2)  Voluntary Bundling (WG2)  Transitional Arrangements (WG2)  Mod 3.13 – Further References in UNC (WG2)  Tariff Arrangements – (WG4) 18

Summary Changes to UNC Modification Proposal section in moddescription 2 - Why changeremoved some of the repetition between sections 1 and New Termsdeleted part of definiton relating to unbundled capacity New Termsdefinition of NTS IP Capacity simplified New Termsdefinition of unbundled capacity changed to '…not bundled' New Termsrevised definition of Large Price Steps and Small Price Steps New Termsadded definition for 'Oversell' Generaladded rules on with-holding Technical Capacity Generalsharing factor will not be stated in UNC (except for default rule) Generalconversion from kWh/d to kWh/h shall be 1/24th for all auctions Ascending Clockadded volume bid rules following First Time Undersell Ascending Clockextra information about setting Price Step removed, not required in UNC Competing AuctionsSection largely redrafted to add clarity to process Ascending Clockadded rule on auction time out Uniform Price Algorithmadded rule on automatic roll forward of bids for day ahead auction Uniform Price Algorithmadded rule on minimum bid price Uniform Price Algorithmparagraphs 13) and 14) amalgamated Uniform Price Algorithmamended to cover scenario where some available capacity remains, but can't be allocated as doesn't meet min quantities Day Ahead IP Auctionadded rule on automatic roll forward of bids Surrenderdeleted 'next' for Annual Quarterly and Rolling Monthly auctions Surrenderadded wording to allow NG to process Surrender in event that adjacent TSO does not use PRISMA process Surrenderextended negative entitlement check Surrenderallocation is bundled first; unbundled second Surrenderadded rule about supremacy of gemini data Scalebackclarified that last in is first out in event of scaleback variousmin bid quantity for kWh/h added to Asending Clock, Uniform Price and Surrenders. (100,000/24 = 4,167)