1. Modification 0043 – Limitation on offering for sale unsold capacity
Transmission Workstream 11 Aug 05

2. Investment Lead Time – Industry Views
Desire for certainty pre-auction to understand implications of any bids
post-auction arrangements not supported
Where significant risk that not possible to deliver capacity within 3 years, some Users consider appropriate not to expose industry to risk of large buy-back costs
…but require clarity on circumstances in which Transco NTS would use any pre-auction flexibility
should be “exceptional” circumstances

3. Proposals - Update
IECR Methodology Statement revised to include flexibility pre-auction to not release incremental capacity
Ofgem approved 13 July 05
Modification 0036 raised to align UNC and IECR
FMR with Ofgem for decision
Modification 0037 raised to restrict unsold capacity based on similar principles (as explained at 6th July Workstream meeting)
withdrawn based on industry representations
considered that some concerns could be addressed

4. Proposal Summary
Transco NTS not obliged to release Unsold Capacity in QSEC auctions conducted before 31 March 07 for calendar quarters for which:
significant risk that unable to physically deliver all or part of the unsold capacity if allocated;
expectation that previously allocated capacity would need to be bought back at same entry point; and
written permission obtained from Authority.
If such criteria are met at any ASEP, unsold capacity set to zero for future annual, monthly or daily capacity auctions at the ASEP for gas days within the relevant calendar quarter(s)

5. Example – Unsold Capacity QSEC 05 auction
Quarter
Released
Allocated
Unsold
Apr- Jun 07
100 90 10
July- Sept 07 50
Oct – Dec 07
Jan – Mar 08
Apr – Jun 08 80 20
Jan – Mar 21
Revised
Unsold
Applicable to future annual, monthly and daily auctions
100 20

6. Timetable 12th Aug - Close out of representations
15th Aug - Urgent Modification Report issued
17th Aug - Modification Panel recommendation
18th Aug - Ofgem decision expected
19th Aug – Transco NTS publish QSEC 05 tender