Force Majeure - Capacity Transmission Workstream 2 July 2009

2 Background  In terms of context Force Majeure affecting Capacity has only been declared once (as far as we have been made aware) since the inception of code.  Where National Grid NTS gives notice of Force Majeure under UNC General Terms B3.3.1(a) it is relieved of its UNC obligation to take constraint actions (Buy back) where the Shippers nominate flows in excess of the quantity covered by Force Majeure  Currently Shippers receive no relief from the full payment of Capacity charges once Force Majeure has been called  National Grid NTS has received requests from industry parties to look at addressing this issue

3 High level Proposal  National Grid NTS to:  Continue to invoice Shippers for their full NTS Entry Capacity Charges  Calculate and issue a Force Majeure rebate based on Shipper Holdings ie. Force Majeure quantity prorated between affected Shippers based on individual holdings for an amount that equates to the Force Majeure quantity Price to be based on a weighted average price based on a Shippers overall holdings at the affected point  Recover the Rebate via the Commodity charge  Suspend additional Capacity sales at the affected entry/exit point during the instance of Force Majeure  In the case of a buy back within / below the Force Majeure level affected Shippers to:  Undertake to tender a quantity of capacity (equivalent to the Force Majeure Rebate level) back to National Grid NTS at zero price i.e. the quantity rebated will be bought back at zero price in the case of a buy-back  Any additional constraints beyond the Force Majeure level would be subject to normal buyback principles

4 Extent to which implementation of this Modification Proposal would better facilitate the achievement (for the purposes of each Transporter’s Licence) of the relevant objectives  1(a) the efficient operation of the pipe-line system – The Proposal would introduce additional certainty into the UNC that will enable optimisation of Supply at an Entry Terminal under circumstances of Force Majeure (whether or not such Force Majeure is agreed between parties)  1(d) so far as is consistent with sub paragraphs (a) to (c) the securing of effective competition (i) between relevant Shippers – This Proposal is likely to be fairer in the context of individual projects, hence encouraging future investment and improving effective competition between Shippers. The Proposal may also secure effective competition between Shippers by ensuring that players at single points would not be inappropriately or disproportionately affected by Force Majeure.

5 Proposed Timeframes  If agreement can be reached then National Grid NTS to raise a UNC mod along the following timeframes: Proposal discussed at Tx Workstream02/07/09 Proposal issued for Consultation 16/07/09 Closeout for representations (15bd)06/08/09 Mod Panel decide upon recommendation20/08/09 FMR issued to Ofgem21/08/09 Proposal implementation date01/10/09