1. Modification 0232 Presentation for Total By Gareth Evans

2. Scope Setting  Modification 0232 looks to use current Shrinkage mechanisms to socalise the cost of unidentified gas to the whole industry.  Ofgem has been requested to provide a view on their amenability to adjust price controls to allow this modification to proceed.  Until this view has been received, continue to develop the modification so that all Parties are clear on implementation method and impacts.

3. High-level Impacts  Have considered what we want this Modification to achieve.  Desire a simple and low cost solution  It will have licence and Price Control Implications

4. Business Rules  The unidentified energy (VA) to be purchased will be calculated by a third party in line with the LDZ Shrinkage timescales, so initial proposals will need to be calculated by the 1 March.  Each transporter will be permitted to collect revenue to cover these costs.

5. Business Rules (cont)  The price (PM) to be used to determine the level of allowed revenue will be based on ICE Natural Gas Futures Settle Price for the Month as @ 1 st February of the relevant year.  Therefore the amount of Allowed Revenue (UG) is:

6. Business Rules (cont)  The recovery of Allowed Revenue (UG) back to the end user by GDNs is not to be prescribed but should utilise one of the existing rate codes  The purchased energy should be deducted from the initial daily allocation in line with DN Shrinkage in accordance with :

7. For Future Discussion  Desirability of licence changes  Identity of Third Party  Shipper oversight

8. Contact Details  Happy to answer questions : Waters Wye Associates: Gareth Evans - 01473 822503 gareth@waterswye.co.uk www.waterswye.co.uk