DRSEC Update Transmission Workstream 06 November 2008

2 Order of Events  26 th august UNC Modification 216 implemented  26 th August st DRSEC Invitation Letter Issued (For October Capacity)  29 th August 2008 – RMTTSEC Auction Invitation for October Capacity issued  2 nd September 2008 – 1 st DRSEC held  5 th September 2008 – 1 st DRSEC allocated  8 th September – RMTTSEC Auction for October Capacity held  15 th September 2008 – 2 nd DRSEC Invitation Letter Issued (For Nov ‘08 to Mar‘09)  23 rd September 2008 – 2 nd DRSEC held  29 th September 2008 – 2 nd DRSEC allocated / RMTSSEC Auction Invitation for ‘November’ Capacity issued  4 th October 2008 Transmission Workstream – National Grid NTS commits to additional DRSEC  6 th October RMTTSEC Auction for November Capacity held  9 th October 2008 – 3 rd DRSEC Invitation Letter Issued (For Dec ‘08 to Mar ‘09)  17 th October 2008 – 3 rd DRSEC held  21 st October 2008 – 3 rd DRSEC allocated  27 th October RMTTSEC Auction Invitation for December Capacity issued

3 DRSEC Update  National Grid NTS raised UNC modification 216 to facilitate the release of additional NTS Entry Capacity to the market.  Identified completion of New Pipeline developments in the Easington area as a trigger for holding first DRSEC auction with the aim of releasing approximately 10mcm/d for the months Oct ’08 to Mar ‘09  Implementation date of mod 216 National Grid NTS resulted in National Grid NTS holding separate DRSEC auctions for the periods October ’08 and November ’08 through to Mar ’09.  September ’08 (November ’08 to March ’09) DRSEC saw demand levels in excess of the guidance figure issued by National Grid NTS  Delays in pipeline completion/commissioning increased the levels of uncertainty & risk impacting upon the levels of NTS entry Capacity that National Grid NTS was willing to allocated during the DRSEC process  National Grid NTS releases less than the 110 GWh/d indicated in its invitation letter dated 15 th September for all months

4 DRSEC Auction 2 – November ’08 to March ‘09 Month Aggregate Bid Qty. kWh Aggregate Qty Allocated kWh WAP Qty Allocated p/kWh Aggregate Qty Unallocated kWh WAP Qty Unallocated p/kWh Nov ‘0853,899, n/a Dec ’08135,138,25683,471, ,666, Jan ’09147,242,51486,199, ,043, Feb ’09223,149,30287,483, ,665, Mar ’0963,864,1253,515, ,711,

5 DRSEC Update  National Grid NTS has always stated that the figure of 10mcm/d was the approximate level of capacity that we would seek to release once the new infrastructure was in place and commissioned  National Grid NTS undertook the DRSEC auction prior to confirmation that new infrastructure was in place, this was in order to satisfy industry requirement for additional NTS Entry Capacity for November  This resulted in National Grid NTS adopting a more cautious stance with regards to the quantities of NTS Entry Capacity released at this time.  In response to the high level of unsatisfied Demand (Dec ’08 to Mar ’09) National Grid NTS committed to an additional DRSEC once the new infrastructure was commissioned  Once commissioning was completed a new DRSEC Auction was held on the 17 th October

6 DRSEC Auction 3 – December ’08 to March ‘09 Month Aggregate Bid Qty. kWh Aggregate Qty Allocated kWh WAP Qty Allocated p/kWh Aggregate Qty Unallocated kWh WAP Qty Unallocated p/kWh Dec ’0824,791,34324,791, n/a Jan ’0998,575,93950,116, ,459, Feb ’0998,059,28849,757, ,301, Mar ’0950,330, n/a

7 Decisions Made  Number of Rounds/Auctions & Quantity Released/Allocated  Original aim was to have one instance of DRSEC covering October ’08 through to March ’09.  To offer NTS Entry Capacity for the month of November the latest the DRSEC Auction could be held was September, this date was driven by the RMTTSEC process  At the time of holding the DRSEC our current information was that the new infrastructure would be in the ground & commissioned by the start of October.  At the time of allocation this was no longer the case, this level of uncertainty coupled with the Demand Level seen & Bid Information received was taken into account as part of National Grid NTS’ analysis  In the Auction Invitation National Grid NTS clarified that the figure of 110GWh/d was a guideline with the caveat that the allocated level may be higher or lower.  In response to the high level of unsatisfied Demand (Dec ’08 to Mar ’09) National Grid NTS committed to an additional DRSEC once the new infrastructure was commissioned

8 Approach  Ideally National Grid NTS would have held 1 DRSEC covering all required months with a fixed level of NTS Entry Capacity made available  To do so in this case would have resulted in an October DRSEC only covering Dec ’08 to March ’09 & 110GWh/d made available, no NTS Entry Capacity would have been made available for October & November ‘08  The flexibility offered by the DRSEC process enabled National Grid NTS to adapt as issues arose. Whilst we recognise that this was not ideal for all Shippers a number of benefits did arise from this approach:  National Grid NTS was able to fully satisfy Demand for Oct, Nov, Dec ’08 & March ‘09  National Grid NTS was able to release additional NTS Entry Capacity to satisfy a Demand Level above 110GWh/d for January & February ’09  Shippers were able to have a degree of price discovery

9 Proposed DRSEC Request Process  Step 1 - DRSEC requests for to be provided via a Proforma available on National Grid NTS’ website (using contact details also to be provided on the website) providing the following information:  Shipper Name  ASEP required  Period Required (Days) to be a minimum of [10] business days prior to the 1 st gas day required to be for a minimum of [5] days To be consecutive days to be for a period <1 month  Quantity Required [Maximum]  Step 2 - National Grid NTS will assess the request taking a maximum of [3] business days  must meet requirements of step 1  RMTTSEC auction for the required Capacity month must have allocated  Request cannot be met by available baseline capacity  High level analysis indicates that additional capacity can be released

10 Proposed DRSEC Request Process  Step 3 – National Grid NTS will inform either:  The Requesting User that we are unwilling to a DRSEC Auction or  All Users (via a DRSEC Invitation Letter) that we will be holding a DRSEC Auction

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