Review Group Modification Proposal Introduction of Enduring NTS Exit Capacity Arrangements

2 Comparison between Mod 166 and Mod 116CV General All relevant dates have been rolled forward 1 year on the assumption that transitional arrangements will end 30/9/2011. Prevailing NTS Exit (Flat) Capacity now called Enduring NTS Exit Flat Capacity. Reference to amounts replaced by quantity Introduction section refers to 166 being the “consensus” view of the Review Group, refers to the fact that 166 will be considered in parallel with all 116 mods and states which categories of NTS Exit Point are covered by the mod.

3 Comparison between Mod 166 and Mod 116CVV Section 1 – NTS Exit Capacity Products NTS Exit (Flat) Capacity shall comprise NTS Exit Capacity and NTS Offtake (Flat) Capacity, both as defined in the UNC. (116CVV - NTS Offtake (Flat) Capacity extends to all Users) NTS Exit (Flexibility) Capacity shall comprise and be equivalent in all respects with NTS Offtake (Flexibility) Capacity, as defined in the UNC, and its acquisition shall apply only to DNO Users (116CVV - NTS Exit (Flexibility) Capacity is made available to DNOs and the extension of this other Users is not included)

4 Comparison between Mod 166 and Mod 116CVV Section 2 - Initial Allocation, Annual Application and Reduction Users at SSMPs and CSEPs can appoint an Exit Capacity Booking Agent or Overrun Agent to set their Initial Enduring NTS Exit (Flat) Capacity subject to agreement by all Users. Reductions of Enduring NTS Exit (Flat) Capacity can specify an earliest date and latest date. A reduction can take effect any time between earliest and latest date if NG can use the relinquished capacity to satisfy a demand elsewhere. If NG can can use the relinquished capacity the 4 year user commitment ceases from the reduction date. NG can invite ad hoc invitations to reduce Enduring NTS Exit (Flat) Capacity in response to demands outside the July Application Window.

5 Comparison between Mod 166 and Mod 116CVV Section 2 - Alternative Application Process Users can apply for Enduring NTS Exit (Flat) Exit Capacity between Oct and Jun at new NTS Exit Points and at existing NTS Exit Points where capacity increase is > 25% of baseline or 10GWh/d. Applications will specify the earliest and latest dates capacity is required. Earliest date shall not be earlier than 6 mos, latest date shall be that which would have applied if application had been made in the July Application Window. NG required within 90 days to offer User requested capacity from a date between earliest and latest dates. User has 30 days to accept NG’s offer (providing not subject to credit restriction)

6 Comparison between Mod 166 and Mod 116CVV Section 2 - Alternative Application Process (contd) Once User accepts the offer NG obliged to deliver capacity by the Reserved Date and the User is subject to 4 years user commitment from then. If NG is required to invest to meet the requirement a Demonstration Date will be set by NG. Demonstration Date shall be the latest date NG requires the User to demonstrate they will able to use the capacity reserved in order for NG to award binding contracts for their investment. If User fails to demonstrate, or if the User is subject to credit restriction, NG: –may delay their investment –shall extend the Demonstration Date by 1 year, unless mutually agree otherwise –shall extend the Reserved Date by no more than 1 year

7 Comparison between Mod 166 and Mod 116CVV Section 2 - Alternative Application Process (contd) NG will notify all Users of capacity reserved through this process 10 days after acceptance of an offer. Developers may apply for initial Enduring NTS Exit (Flat) Capacity on the same terms as Users. This will be achieved by NG including similar terms in their ARCA which would apply on acceptance by the developer. If User fails to demonstrate because NG has not built connecting pipe on time, NG shall not extend the Demonstration Date or the Reserved Date. Section 2 - Annual & Daily Allocation Annual NTS Exit (Flat) Capacity no longer subject to auction and can be applied for in the July Application Window. Applications can be for the next 3 Gas Years Users informed of allocations 5 Business Days after July Application Window Basis for allocating daily firm bids described within Mod

8 Comparison between Mod 166 and Mod 116CVV Section 3 – Release of Flexibilty DNO Users continue to acquire NTS Exit (Flexibility) Capacity though the current OCS process. Shipper Users not required to acquire NTS Exit (Flexibility) Capacity and continue to access flow rate variations via OPNs. OPNs will be accepted if within system capability and if will not give rise to Operational Balancing Requirements. 116CVV previously covered flexibility monitoring but most of the above points were previously included Section 4 – Transfers and Assignments Restrictions on transfers of NTS Exit (Flat) Capacity around the annual allocation have been removed (116CVV – included them but these came from 116V and were required only because of flexibility) Reference to Exit Capacity Neutrality removed

9 Comparison between Mod 166 and Mod 116CVV Section 5 – Exit Capacity Management No change Section 6 – Liabilities and User Obligations NG required to buy back Firm NTS Exit (Flat) Capacity if they cannot make gas available subject to capped buyback price for delayed investment stated in their licence (116CVV – required NG only to pay current UNC failure to make gas available charges) The section on non compliant has inadvertently been deleted and will need to be re-instated. Pressure section remains the same as 116CVV and 116V

10 Comparison between Mod 166 and Mod 116CVV Section 7 – Charges NTS Exit (Flat) Capacity Overruns are levied on the highest overrun in a month at 2 x Applicable Annual Rate or 1.1 times the highest price paid for buyback for that NTS Exit Point in the month whichever is greater(116CVV – Overruns charged on a daily basis at rates consistent with entry regime) Reference Firm and Interruptible capacity holdings possibly being negative (116CVV – Not stated but covered in the business rules) Failure to interrupt charges apply on a daily basis if a Shipper User has failed to interrupt in response to a curtailment notice and charged at 2 x Applicable Annual Rate or 1.1 times the highest price paid for buyback for that NTS Exit point on the day whichever is greater(116CVV – Failure to interrupt included as part of daily overrun) Overrun charge will not be applied in relation to a day a failure to interrupt charge has occurred (116CVV – Not relevant as single overrun regime applies)

11 Comparison between Mod 166 and Mod 116CVV Overruns and FTI Questions Review Group not in favour of entry overrun regime and preferred current exit arrangements be applied to overrun and FTI –Is it appropriate to have a monthly overrun regime in a world of daily exit capacity sales and buybacks? –Will applying charge only to the highest overrun in month reduce incentives within month once an overrun occurs? –Is 2 x Annual Rate for overruns sufficiently penal? –Should overruns when NG buys back be treated as FTIs and charged on a daily basis? –Should there be just one daily overrun regime and if so what charges should apply? –How might an annual overrun product be affected? –Is it appropriate to have different overrun regimes for NTS and LDZ Exit Points?

12 Comparison between Mod 166 and Mod 116CVV Section 7 – Credit Arrangements Value at Risk introduced following implementation of Mod 114AV (116CVV – Referred to indebtedness) Notification of breach where VAR exceeds 70% of credit limit and rejection of capacity bids and assignment at 100% in line with Mod 145 (116CVV – limits were 70% and 85% respectively) Instances where NG may take action once VAR exceeds 100% of credit limit referred to as Credit Restrictions. Credit Restrictions to include NGs right to refuse to accept offers under the alternative process and not to proceed with investment to make capacity available by the Reserved Date under the alternatibe process. Should Credit Restrictions refer to both transfers and assignments? If so this may need to be made clearer in the mod.

13 Comparison between Mod 166 and Mod 116CVV Section 8 – other Impacts Low Demand Days section of the UNC to be retained (116 CVV removed this in line with 116V but these are needed in the absence of NTS Exit (Flexibility) to all Users) Section 9 – Information Provision By 1/10/08 NG to provide on its website Daily offtake, Daily offtake to 22:00 and Daily Flex usage for all NTS Exit Points by NTS Exit Zone. Information to be provided at D+3 (116CV – Flex usage by NTS Exit Zone by 1/10/2010 provided at D+1) By 1/10/09 NG to provide on its website opening linepack and actual closing linepack by Linepack Area. Information to be provided at D+3 (116CV – Not included) Section 10 – Transitional Timetable Changes to Table 2 to reflect the above