EBCC MEETING 25 th October 2013

AGENDA 1.0Introduction 2.0Minutes and Actions 3.0Operational Update 4.0Modification Proposals 5.0 Significant Code Review Update 6.0Bank Ratings 7.0Review since April Focus for 2013/14 9.0AOB - EU Update - Winter Planning Prep - Risk Register - Voluntary Discontinuances 10.0Date of Next Meeting

Operational Update September 2013

Modifications

Mod 0429 Customer Settlement Error Claims Process –Implementation effective at April 2014 –Xoserve to develop internal process –Energy Adjustments to be processed via ADS at average SAP

Market Operator Security Provisions Meeting was held with the MO on 17 th October MO agreed to the final drafting approved by EBCC members and are happy to sign and approve the Prepayment Agreement Confirmation that the Deposit Deed will be in place with the required level of Security.

Significant Code Review Update

Security of Supply Significant Code Review OFGEM are now consulting further on DSR auctions with the industry and taking further interest in the impact on credit arrangements. – Meeting held on 14 th October 2013 minutes published on Ofgem’s website.

Operating Process Delegation of Authority Shipper information System access Suspension of all services Emergency MOD Resource Cost Banking Services Review sign off of credit payments Reporting to ofgem/EBCC special arrangements Review current rules Succession + capability MOD 233? Skill setExclude EBI availability Availability Suspension of holidays WLB of key staff Daylight Limit NGD Daily limits Operating limits Availability of CEO due to increased values Contact list Temporary shared area Box account for communication Delegated Authority levels

Priority of Scoring For EBCC meetings Portfolio growth Communication interaction commercial intelligence reporting Downgrade risk factor risk Security arrangements Party underwriting Payment trends Over or under delivery trends FSRs number of cash calls over previous period Level of helpfulness How they act in market Ability to pay D + B Moody’s S + P

EBCC Operation National Grid input Establish who from Xoserve required Conflict of interest INCIDENT ROOM Ofgem’s role Chair Availability Quoracy Gemserve members appointment Communication Agree Adhoc appointment process Consider membership ofgem/another party Priorities on order Of discussion Factors Minutes Checklists Recording Review timing Resources

Relaxing current arrangements Business rules Security Cash collection Market Operator EBCC Meetings Cash calls No changes proposed. Existing rules apply- due to arrangements drafting + under UK termination process S.1.7. timing for convention of meeting Appeal Process Resource issues Extend time? Reduce or suspend appeal notice No appeal criteria Still issue Payment terms extend ? Timing extend? - 4pm – end of gas day Agree with EBCC members no validation FSR Consider suspension for a period beyond invoices issued and paid Validate cash call suite System solution for manual adjustment Manually update letters/notices as we do currently Cost of funding change Communication of delivery Faxes? Scan, or file interface Aggregate exposure Accepting LOC from lower rated organisations % of exposure underwriting Process going forward Suspending/ excluding peak SAP calc

Bank Ratings

Current Position Since April 2013 the global economic markets have remained fairly stable resulting in no significant downgrades. Royal Bank of Scotland, National Westminster are on possible downgrade and Citibank are currently on possible upgrade with Moodys, non of the FI’s are currently on watch with S & P. RBS, Loan to deposit ratio is currently on 100% in 2009 it was 130%.

Aggregate secured credit by rating band 2,200, ,080, ,052,000128,942,00066,973,00076,854, ,861,500135,123,0001,775,000 3,500,000 64,912,00056,580,000117,511, ,537,,000 5,345,000

Impact of ratings review 4% of all FIs currently providing Security have been subject to a downgrade change during the previous 12 months by Standard and Poors and Moody’s Rating Agencies. Currently 61% of FIs are in the lowest categories of investment grade rating. FI Ratings April % 20% 2% 8% 21% 8% 57% 4%

13% 100% 0% Outlook 10% Possible Downgrade 90% Not on Watch Moody’s Outlook 63% Negative 37% Stable S & P’s Outlook Having completed a significant rating review throughout 2012 and again in June % of FIs are currently reported as possible downgrade. S&P are commencing significant reviews across a large number of FIs, with 63% showing a negative outlook. 10% 90% 37% 63%

Deposit Deeds Value of credit secured via Deposit Deed and LOC – comparison between April 2012, September 2012, April 2013 and September ,162,000332,941,50017,653,000 24,436, ,394,000 30,761,250362,385,000 33,474,000

Conclusions Security value whilst it has increased we have only seen a small increase on the Deposit Deeds since April Most Users are very settled with the Deposit Deed since they were introduced. Since the EBCR were revised in December 2011, we are continuing to see a movement from the higher banding A1 to A2. Continue to monitor those FI’s which are currently on possible downgrade

Review since April 2013

Cash Collection figures on rolling 12 month performance highest remain the past 5 years. Cash Collection Monthly figures 100% over the past 12 months on 7 occasions. Continued pro-active engagement with Users reaching 70% of indebtedness to minimise Cash Calls. No Terminations managed - No financial losses Security Renewals 100% Energy Balancing Credit Rules revised 16 th May 2013 to permit smearing of recovered debt where the debt predates the Code Cut off Date. Sale of Lehman’s Debt completed. Successful LRQA Audit

Focus for 2013/14 Update

Focus for 2013/14 addressed at April 2013 meeting From the meeting held in April 2013, the following key areas were identified to focus on :- –Increase the profile of the committee –Emergency Credit Rules –Watching brief on European Members to review if there are any other significant areas that they would like the committee to focus on.

Focus 2013/14 EBCC Customer Satisfaction

Year on Year Comparison

AOB

EU Third Energy Package Update

Current Position Congestion Management Procedures NC – Adopted in August 2012, first implementation is due to take place in October 2013 (MOD 449). Final stage of implementation is due July Capacity Allocation Mechanisms NC – Due to be formerly adopted imminently with a likely implementation date of October This encompasses the Gas Day Change and the European trading platform (PRISMA).

Current Position Cont. Balancing NC – Adopted in October. Implementation has been set as 1 st October Interoperability and Data Exchange NC – Final Draft of the NC submitted to ACER on 10 September No indicative implementation date, but it is likely to coincide with CAM. Tariffs – The Framework Guidelines are still in consultation, the NC has not yet commenced drafting. There is uncertainty about the implementation – ideally this should coincide with CAM.

UK Progress Modifications raised for the Gas Day change and to implement new Code definitions ie Interconnection Point. NG scoping PRISMA (European trading platform) to facilitate ‘bundled’ cross border trades. Feedback to recent consultations has been positive and NG are looking to join PRISMA in 2014.

Winter Planning An updated pack will be issued to members in due course to include a meeting template Meeting/ teleconference will be held with newly appointed members to run through the operation of an emergency meeting during November 13

Risk Register Update

Register Part 1 Risk Register as at 26/4/13 : RiskLikelihood - commentsLikelihood H1 loss of Gemini system - sustained loss for 1 working day or more Once in 10 years – to date Gemini over 2 years Gemini has had 1 short overnight outage. Also due to Oracle Software Upgrade, Gemini affected between 22nd and 25th October. Loss of Gemini on 14th and 15th May due to Server problems. GRP implementation planned 9 th June. Suggest move from a 2 to a 3 H2 Calculation for IMS is found to be incorrect. Has happened in Dec 05 and also recently when during Oracle OS upgrade UAT it was found that accruals not included in a D-1 or D-2 recalculation – twice in last 6 to 7 years – once in 5 years. April 08 data was uploaded incorrectly. Recent issues identified on the 7 th of March and 6 th April following batch job issues. Suggest move from a 3 to a 5 H3 APX Gas files containing system prices and trades arrives late. Pre Gemini IMS this used to stop PIMS jobs running – since introduction of Gemini IMS this has not happened – once in 5 years. Controls and monitors are now in place to ensure files are received.3

Register Part 2 Risk Register as at 26/4/13 : RiskLikelihood - commentsLikelihood H8 User’s unable to provide CVA data due to the CVA system / website being down This happened once on 13/03/07 – Once in 5 years. Controls in place that would receive notification from CVA.3 H9 In the absence of being unable to adjust the ABI calculation the industry could be unduly exposed to avoidable financial debt. Should NGD be aware of more up to date information. Due to SCR Mod 233 this was put on hold to await outcome of SCR consultations. Potential implementation of OFGEM SCR proposal has the potential to increase the likelihood and impact of this issue. Suggest move from 3 to 4 H10 Due to the current European financial climate, there is a risk that the number of FI’s meeting the relevant criteria to provide security could reduce significantly. Moody’s are currently have a schedule to review all FI’s current rating in June Moody’s review of FIs completed over the summer of 2012, S&P now anticipate conducting their own review.4

Voluntary Discontinuance

AOB Questions/ Any further business?