Gas Performance Assurance Framework 11 th January 2013 Confidential

Gas Settlements, Energy Retail Objective 2 To ensure that gas settlement has accurate allocation, control, self monitoring and governance post Project Nexus so that no commercial advantage can be derived from settlement

Gas Settlements, Energy Retail Update from 11 th January meeting 3 There was general agreement on the benefits and need for a Performance Assurance regime amongst Workgroup attendees Attendees also agreed that quick wins would be advantageous However it was recognised that a framework for a Performance Assurance model could be the initial focus, with issues and controls being introduced on a “merit/materiality” basis ScottishPower agreed to provide more detail on the model that they had outlined and provided for the Workgroup

Gas Settlements, Energy Retail Governance Structure – Foundation Stage 4 Performance Committee Performance Assurance Panel Report on issues Analysis required Reporting by Xoserve Reporting requirements to be established Performance Committee to be set up Performance Assurance Panel to be appointed and constituted Report on issues Consider: Meeting frequency Facilitating meetings Analytical support needed Rationale for agreeing materiality Governance – including interaction with Performance Assurance Panel …… Consider: Funding Meeting frequency Facilitating meetings Decision making powers Rationale for approving materiality Rationale for agreeing priorities Governance How are Panel appointed Who can be on the Panel ….. Consider: Funding Specification of reports Timings of reports Ensuring accuracy Trend analysis….

Gas Settlements, Energy Retail Governance Structure – Initial Stage 5 Performance Committee Performance Assurance Panel Report on issues Analysis required Reporting by Xoserve Reporting requirements to be established Performance Committee to be set up Performance Assurance Panel to be appointed and constituted Report on issues Consider anonymous reports Determine implications on industry process and procedures Are the issues “resolvable”? What is the materiality of the issue? Will the issue be resolved without incentive? (possible MOD in progress or system issue that is scheduled to be fixed, maybe through Nexus) Create report to Panel - issues, materiality, possible target/incentives Receive reports Request additional information as necessary Consider materiality, ability to resolve and prioritise, outlining actions Parties can take to resolve Consider where targets/incentives could be applied Either raise a MOD with Performance target and incentives (where necessary) or develop Working Practice and Procedure Process serials to be developed. For example: AQ Review – AQs of 1kWh, unallocated site statuses Meter read submission – meeting UNC requirements Asset issues – incorrect data Reconciliation – timing out of reconciliation, MOD640 sites Opening Meter Readings RGMA – flow and update issues KEEP THE FOCUS ON ESTABLISHING QUICK WINS

Gas Settlements, Energy Retail Governance Structure – Ultimately??? 6 Performance Committee Performance Assurance Panel Report on issues Analysis required Reporting by Xoserve Report on issues Reporting established and incremented as required Performance Committee receiving frequent reports and reporting to Panel Performance Assurance Panel appointed and monitoring and incentivising Monitoring requirement: Accurate allocation Certainty of costs Retrospective update Meter point reconciliation Rolling AQ Industry wide scaling LDZ input measures Controls: Provide guidance on proven techniques Formulate standards required/expected/necessary Propose targets and incentives via modification/working practice documents Reporting requirement: Initial allocation Meter reading performance AQ update performance Meter point reconciliation Retrospective update iGT CSEP and site reconciliation Reporting of input/output measures and scaling Accuracy of allocation algorithms DETECT MONITOR INCENTIVISE/CONTROL

Gas Settlements, Energy Retail Performance Assurance Panel 7 The Panel would be made up of Independent Industry Experts There would be a tender process to appoint [5] Industry Experts and a consumer representative [Consumer Focus] This process would be run by [Xoserve] as the legal entity who would procure the services of the experts and contract their engagement To allow Xoserve to appoint the [5] Industry Experts, the Performance Assurance Committee will provide a recommendation of the mix of skills and experience necessary to make the Panel an effective advisory body, with impartial experts Industry Experts would be contracted, with the terms of contract including – Confidentiality, Data Protection, Indemnity and Conflict of Interest

Gas Settlements, Energy Retail Performance Committee 8 The Committee will be open to all Parties to the UNC Xoserve will provide reports to the Committee, as requested and determined by the Committee and through requests from the Panel The Committee should also work with Xoserve and the AUGE to facilitate requests from the Panel, where they are trying to assess materiality of an issue The Committee will make a recommendation to Xoserve on the Skills and Experience required of the Performance Assurance Panel to allow them to undertake an appointment process The Committee will also determine the budget for the Committee through majority vote

Gas Settlements, Energy Retail Controls under Performance Assurance 9 A number of reports will be provided by Xoserve to the Committee on a monthly basis, for example: Input measures – frequency, quality and control Output measures (for example meter readings) – frequency, quality and control iGT registrations and data update – frequency, quality and control Site registrations – exceptions and handling Asset information – status, verification and responsibility Data quality (measure of errors) – meter readings, asset information Process serials – AQ update, threshold crossers, dead meters, product switching Accounting of unidentified gas – AUGE continuing role Difference between input and output by LDZ to consider unidentified gas

Gas Settlements, Energy Retail Possible issues to be controlled/resolved 10 Post Nexus a lot of issues could be resolved, but these are possible ongoing elements to be considered: Offtake errors Meter reading submission in line with UNC and Licence requirements CSEP update Shipperless and unregistered sites Incorrect asset information and invalid meter readings AQ update performance and the timing out of reconciliation, prevalence of MOD640 charges, sites not allocated gas and erroneously low AQs Shrinkage and allocation