SGN’s July 09 Mod 186 Report DCMF Meeting – July 27 th 2009

Scotland Revenue Data

Scotland – Commentary (1) Background Information * This is an increase to new rates under 95/5 methodology (implemented October 08) - not an increase to Oct 07 rates Disclaimer - Refer to published report Sensitivity Analysis – Refer to published report 2008/09 Pass through movement is due to a change in Formula Rates, NTS Pension and Licence Fees Incentive movement is primarily driven by increases in the Mains Replacement allowance and Innovation Funding offsetting decreases in the Shrinkage allowance

Scotland – Commentary (2) 2009/ /13 Pass through movement is due to a change in Formula Rates, NTS Pension, Licence Fees and the Traffic Management Act TMA costs will be incurred during 2009/10, however we do not anticipate an Ofgem determination until later in Consequently 2010/11 includes the first two years of TMA allowances Incentive movement includes increases in the Environmental Emissions and Innovation Funding Incentive mechanisms - and the Discretionary Reward Scheme from 2010/11. From 2008/09 to 2009/10 the shrinkage allowance decreases from the inflated PCR shrinkage - however from 2010/11 onwards the shrinkage allowance increases No provision has been made for the potential tax reopener, however we anticipate there will not be a trigger of an Income Adjusting Event before 2010/ /14 Due to 2013/14 being in a period of a yet undetermined Price Control Review - a working assumption has been made of total allowed revenue being 2012/13 allowed revenue with forecast RPI applied

Southern Revenue Data

Southern – Commentary (1) Background Information * This is an increase to new rates under 95/5 methodology (implemented October 08) - not an increase to Oct 07 rates Disclaimer - Refer to published report Sensitivity Analysis – Refer to published report 2008/9 Pass through movement is due to a change in Formula Rates, NTS pension and Licence Fees Incentive movement is primarily driven by decreases in the Shrinkage and Mains Replacement allowances - outweighing increases in Innovation Funding, Exit Capacity and Environmental Emissions allowances

Southern – Commentary (2) 2009/ /13 Pass through movement is due to a change in Formula Rates, NTS Pension, Licence Fees and the Traffic Management Act TMA costs will be incurred during 2009/10, however we do not anticipate an Ofgem determination until later in Consequently 2010/11 includes the first two years of TMA allowances Incentive movement includes increases in the Environmental Emissions, Exit Incentive, Innovation Funding Incentive mechanisms - and the Discretionary Reward Scheme from 2010/11. From 2008/09 to 2010/11 the shrinkage allowance decreases from the inflated PCR shrinkage assumption - however from 2011/12 onwards the shrinkage allowance increases No provision has been made for the potential tax reopener, however we anticipate there will not be a trigger of an Income Adjusting Event before 2010/ /14 Due to 2013/14 being in a period of a yet undetermined Price Control Review - a working assumption has been made of total allowed revenue being 2012/13 allowed revenue with forecast RPI applied