Shrinkage Forecasts - Factors David Simpson September 2014

2 Shrinkage Forecasts - Timetable Initial Proposals for following year published by 31 st December Final Proposals for following year published by 1 st March Assessment and Adjustment report published by 31 st July the following year E.g. for 2014/15 Shrinkage Forecasts Initial Proposals published by 31 st December 2013 Final Proposals published by 1 st March 2014 Assessment and Adjustment will be published by 31 st July 2015

3 Shrinkage Forecasts - Factors Following factors are taken into account when evaluating Shrinkage Forecasts :- Previous years actual Shrinkage is the starting point Repex programme – length x material x diameter mix - Largest Impact on Shrinkage Forecast Estimated impact on Mains and Service Leakage Average System Pressures (ASP) – estimate how they might perform Take account of previous years ASP’s – was it a warm or cold year Impact of any Pressure Management investments MEG Treatment (Mono-Ethylene Glycol) – estimate performance MP Mains – consider if any change expected to MP mains asset AGI Assets – consider if any major changes to AGI Asset numbers Estimate of Theft of Gas and Own Use Gas based on estimate of Annual Throughput

4 Shrinkage Forecasts – Possible Variations Potential variations against Shrinkage forecast :- Actual Repex length x material x diameter mix differs from forecast Average System Pressures are higher or lower than forecast – influenced by a number of factors including weather/demands, operational activities Large Interference Damage – these would not be forecast but in exceptional circumstances could impact on actual performance Significant variation in Annual Throughputs against forecast – impacts on Theft of Gas and Own Use Gas Variation in actual MEG performance against forecast Actual MP Mains length x material x diameter mix Some of the above factors are interlinked – it is very difficult to determine the individual impact of each factor