1. UNC Transmission Workstream 7th December 2006
Summary of National Grid Enduring Exit Consultations - ExCR and Gas Charging
UNC Transmission Workstream
7th December 2006

2. National Grid NTS Consultations
ExCR
“User Commitment”
Flexibility areas and zones, and associated limits
GCD 01 – NTS Exit (Flat) Capacity
Prevailing NTS Exit (Flat) Capacity
Reserve prices for annual and daily auctions
GCD 02- NTS Exit (Flexibility) Capacity and Commodity
New SO Flexibility Commodity Charge Rate
Revised SO Commodity Charge Rate
GCD 03 – Under/over-recovery mechanisms

3. Industry Responses Received
Respondent
ExCR
GCD01
(Flat Capacity)
GCD02
(Flexibility)
GCD03
(Revenue Recovery)
E.on ü
Statoil UK
Scottish and Southern Energy
EDF Energy
RWE npower
The Association of Electricity Producers (AEP)
International Power
Scotia Gas Networks
National Grid UK Distribution
Wales & The West Utilities

4. ExCR- General comments
In making responses, many respondents recognised uncertainty of:
Licence obligations - default lead times, obligations and incentives
UNC Mod Proposals
Charging Proposals
Responses made without implying support for exit reform

5. ExCR - User Commitment Responses
Proposal
Response
4 year commitment for increases in capacity
Against - Preference for 1 year, consistent with Langage and Marchwood determinations
Why need for increase?
-Option 1; or
-Option 2
Option 1 – Recognised simplicity, but not preferred
Option 2 – Preferred option (by 5 of 7)
Option 3 – NGD propose new option where prices fixed at time of application
Link to ARCAs?
Reduction notice period
Against - Concern over rigidity of process (14 months and Oct effective date) leading to potential capacity sterilisation - call for ability to reduce earlier if “efficient and economic”

6. ExCR - Flex Responses Proposal Response Flex zones and areas
Broad support as pragmatic starting point
Flex limits
Best place for limits?
Methodology for update?

7. GCD01 - Flat Capacity Charging Proposed Changes and Responses
Initial Change Proposal
Response
Transcost or Transportation Model
9:1 Support for Transportation Model
Interruption Payments removed
No comments
No adjustment of capacity charges to recover allowed revenue
Flat charges would recover approximately 45% of TO Exit Costs.
Against – would like to see charge adjusted (or scaled) to recover majority of allowed TO Exit Revenue
No capping of annual price movements
Support
Removal of zones for NTS/LDZ offtakes

8. GCD02 - Flex Capacity & Commodity Charging Proposed Changes and Responses
Initial Change Proposal
Response
Reserve price equal to 0 p/kWh,
consistent with principle that there has been no specific NTS investments for flexibility capacity
Support – although some not in support of the product
Applicable Flex SO Commodity Rate proposed to be set at common rate for all zones –
Based on proportion of relevant SO costs considered appropriate to target to within day flow variations
Against
Do not agree that a charge should be levied (or in some cases, that the product should be defined
Over complex – don’t understand requirement
Some support for zero price and monitoring
Applicable Flat SO Commodity Rate Set to recover of 50% of allowed SO revenue net of flexibility commodity charges
Support
Support for single adjustment ratio i.e. initial flat/flex price ratio maintained in the event of over/under recovery

9. GCD03 - TO Over/Under Recovery Proposed Changes and Responses
Initial Change Proposal
Response
Under Recovery
TO Exit (Flat) Commodity Charge
Would be deigned to recover residual TO Exit (50%) revenue after TO Exit (Flat) & (Flexibility) Capacity auction outcome
Support
subject to flat capacity charges being adjusted first
Over Recovery
Exit Buy-back offset mechanism
Excess revenue would be used to offset an entry buy-back scheme should such a scheme be introduced (Analogous to PC65 Entry mechanism)
Negative TO Exit (Flat) Commodity Charge
Would be deigned to redistribute residual TO Exit (50%) revenue after TO Exit (Flat) & (Flexibility) Capacity auction outcome
Some support for exit but-back offset mechanism: recognise that it would not be applicable if there was no buy-back incentive mechanism

10. Way Forward
National Grid considering responses and potential changes to its initial views
Desire to consult on final proposals after Ofgem decisions on
alternate UNC Mod Proposals
GCM01 Capacity charging proposals
If not possible due to time constraints, consultations will be undertaken based on stated assumptions