Enduring Exit Regime & NTS Risk Management Processes Offtake Arrangement Workstream – OAD Section I Review Group 316

2 Agenda  Enduring Exit Regime & NTS Risk Management Processes - Overview  Real-time Network Modelling Tools  NTS Risk Management and Constraint Management  Next Steps Discussion  Flow Swapping Process

3 Constraint Forecasting Overview Telemetry Physical & Commercial Constraint Management Tools DFN Data OPN Data On-line Network Modelling & Assessment Within Day Constraint Management Strategy Constraint Forecasting & Identification

4 Risk in the Enduring Regime  Potential risk generated due to Interruptible NTS Offtakes becoming Firm NTS Offtakes  More Offtakes & greater Volatility/System Flexibility  Zero Exit buyback target and 100% exposure to NG with no collar on the costs  No Exit equivalent of an Entry “TFA”. Therefore constraint management must be carried out BEFORE the constraint occurs  Many locations complicates risk analysis and constraint management decisions

5 Risk in the Enduring Regime  Broadly, there are two main issues that could give rise to an NTS Exit constraint: 1.The flat supply rate is too low to meet the flat demand rate in an area of the network and pressures become critical. 2.The aggregate within day flow variations remove too much linepack and pressures become critical  Scenario 2 is driven by the offtake flow profiles, therefore in order to forecast and mitigate the risk of this scenario day ahead and within-day, good OPN data is essential

6 Risk Associated with OPN Data Telemetry Physical & Commercial Constraint Management Tools DFN Data OPN Data On-line Network Modelling & Assessment Within Day Constraint Management Strategy Constraint Forecasting & Identification Risk of DELAYED Constraint ID Risk of taking inefficient actions Risk of delays, rendering some tools useless Risk of INCORRECT Constraint ID Delayed or Inaccurate OPN Data Risk of Increased Constraint Management Costs

7 Constraint Management (CM) Tools  There are more tools available and no reactive tools (interruption) to deal with Exit constraints in the Enduring Exit regime, therefore more time required to make efficient constraint management decisions  No constraint management tool will have immediate effect, each of the tools have differing lead times  Delayed constraint identification may leave some constraint management options unavailable/ineffective  Delayed constraint identification is likely to drive up constraint management costs

8 Potential CM Tools that rely on OPN Data Offtake Profile Notice (OPN) RejectionOPN data required to run process Flow-SwappingOPN data required to run process Offtake Reduction InvitationsOPN data required to run process Restricting within-day Firm Capacity ReleaseDay ahead OPN analysis to identify potential constraints Constrained Storage UtilisationOPN analysis to identify constraint Surrendering Daily NTS Exit (Flat) CapacityOPN analysis to identify constraint Exit Capacity Constraint Management AgreementsOPN analysis to identify constraint Locational Buy ActionsOPN analysis to identify constraint Operating Margins UtilisationOPN analysis to identify constraint Off-Peak Capacity ManagementOPN analysis to identify constraint

9 Benefits of OPN Data Accuracy Telemetry Physical & Commercial Constraint Management Tools DFN Data OPN Data On-line Network Modelling & Assessment Within Day Constraint Management Strategy Constraint Forecasting & Identification Early Constraint ID Accurate Constraint ID Accurate & Timely OPN Data More certainty of Capacity Availability Better Gas Quality Forecasting Increased Efficiency of Compressor Management Increased Efficiency of OUG & UAG Management Better FWACV Handling Flow Forecasting for Maintenance Purposes Increased Model Accuracy And more….. Reduced CM Costs & Risk

10 Benefits of OPN Data Accuracy  Good within day forecasting will drive down untimely and exaggerated constraint management instances  Better on-line network modelling will help deliver more optimised NTS operation; ultimately reducing NTS operating costs through efficiency savings (compressor costs, Emissions, UAG etc)  Greater certainty of within day capacity availability means more capacity requests will be fulfilled beyond what is obligated.

Summary

12 Summary  The enduring exit regime removes the option of interruption from NTS’s demand management tool kit. As interruption was a close to real time action this both puts more emphasis on;  New exit tools – Of which many use OPN as part of their transaction process. i.e. deviation from prevailing forecast  Forecasting – the use of these tools will need to be assessed at longer lead-times to avoid emergency actions and/or the requirement to curtail exit flows in the first place  More generally optimal NTS operation will ultimately reduce NTS operating costs through efficiency savings (compressor costs, FWACV, UAG etc) through better forward network assessment  Greater certainty of within day capacity availability means we will be able fulfil more capacity requests beyond what is obligated.

13 Position on Development  National Grid NTS continues to believe that receiving information on an offtake by offtake basis on their expected profile is a basic requirement of the system operator in order to meet its safe, efficient, economic and co-ordinated licence obligations.  National Grid NTS would not however be apposed to any changes to either the OPN format, timing and/or associated restrictions in flow profiles (groups and/or single offtakes) if they can be shown to better facilitate these licence conditions between the TSOs.  Overall, National Grid NTS believes the emphasis of ‘section I’ should be on forecast accuracy of the physical profile notification at all lead-times and not simply adherence to prevailing data in order to define allowed ramp rates based on percentage change.

14 Next Steps…?

Flow Swaps – OAD Review Mike Wassell

16 Background  National Grid NTS and the DNOs may initiate flow swaps to manage their systems economically and efficiently.  OAD section I 2.4 (refer to final slide)  Where National Grid NTS or the DNO User request a flow swap the aggregate of the revised OPN rates for all Offtakes in the same LDZ / NTS Exit Zone are the same as the prevailing OPN aggregate rates  i.e. the mechanism as detailed under OAD Section i is for 1:1 swap of flow from one offtake to one or more alternative offtakes serving the same LDZ.  From the 1 st of Oct 2012 DNO User(s) are subject to exit flat overrun charges and any deemed enduring applications that may result from a chargeable exit flat overrun.

17 Example of Flow Swap Exit Point AExit Point B Flow 10Flow 0 Capacity 10Capacity 5 National Grid request a Flow Swap from NTS/LDZ offtake A to NTS/ LDZ offtake B of 7 Post Flow Swap Exit Point AExit Point B Flow 3Flow 7 Capacity 10Capacity 5 Pre Flow Swap

18 Views sought  Is it felt such a scenario is likely in the enduring regime?  1-in-20 obligation  choice of offtakes to swap flow to on majority of cases  Way forward  is there a case for change to the flow swap rules?  Case for change options ?

19 NTS Initiated Flow Swap  OAD Section I  2.4 Revisions requested by National Grid NTS  National Grid NTS may at any time request a DNO to submit revised Offtake Profile Notices for two or more Offtakes for an LDZ, subject to and in accordance with this paragraph 2.4.  National Grid NTS' request shall specify:  (a) the Offtakes in respect of which such revision is requested;  (b) the times with effect from which the DNO is requested to revise the relevant rates of offtake; and  (c) the revised rates of offtake requested.  Any request by National Grid NTS for the revision of any Offtake Profile Notices shall satisfy the requirement that, for all times in the Day, the aggregate, in respect of all Offtakes (serving the same LDZ) for which such request is made, of the revised rates of offtake requested is the same as the aggregate rates of offtake under the prevailing Offtake Profile Notices at the time the request is made.  To the extent to which the revision by the DNO of any Offtake Profile Notice(s) in compliance with National Grid NTS' request would infringe any of the requirements of this paragraph 2 or TPD Section J4.5.2, National Grid NTS shall be deemed to have waived such other requirements (on the assumption that the DNO submits such revised Offtake Profile Notice(s) within 15 minutes after National Grid NTS' request is made).

20 NTS Initiated Flow Swap  OAD Section I  The DNO shall comply with National Grid NTS' request unless in the DNO's reasonable opinion the safe and efficient operation of the LDZ (consistent with the DNO's obligations to Users under the Transportation Principal Document) would be materially prejudiced by the flow of gas at the relevant Offtakes on the basis of the requested revisions, in which case the DNO shall:  (a) contact and inform National Grid NTS of the position as soon as possible following receipt of National Grid NTS' request; and  (b) cooperate with National Grid NTS and use all reasonable endeavours to agree upon alternative revisions to Offtake Profile Notices.