1. Non-code User Pays

2. 2 What we will cover Background Current Services Governance Arrangements What is working well What is not working as well

3. 3 Background User Pays concept introduced by Ofgem during previous PCR discussions We engaged with the Industry back in October 2006, through a series of Workgroups – Xoserve Services Work Group - to develop a more detailed understanding of how a user pays option could look Three areas were considered –Criteria for identifying user pays services –Contracting models –User funding of change The Workgroup report was published in February 2007 All meeting notes and reports are still on the Joint Office site

4. 4 Workgroup output - Criteria for identifying user pays services The Workgroup developed a set of criteria for identifying service that are candidates for user pays – –The key stakeholders for the service line should be Users so that they have the necessary incentives concerning the quality and cost of the service provided –Users should have discretion on whether or how to use the service so that any additional costs incurred by xoserve are charged to the appropriate User and the quantity of the service could be reflected in a different level of usage –A significant proportion of the cost to deliver the service line should be usage dependent, otherwise there are inappropriate incentives on Users –The benefit from treating the service line as user pays should outweigh the cost of the additional complexity of a user pays regime

5. 5 Workgroup output - Services measured against criteria We applied the criteria to each of the 242 Agency Services Agreement lines Following the analysis 12 service lines were subsequently further reviewed by the Workgroup On the basis of all four criteria applying five high level categories were identified as candidates for consideration as user pays –Provide Query Management –User Admission & Termination –Must Reads –Provision of Services in Relation to Obligations under GT Licence –Provision of User reports and information

6. 6 Workgroup output - Governance proposals Workgroup recommended Governance should be agreed and in place before services go live – acknowledgement this would be tight Recommendation from Workgroup –Framework for user pays is developed and forms an ancillary to the UNC –Establishment of a Charging Methodology for user pays services –An annual Charging Statement is published for the forthcoming year –Users contract directly with xoserve for the delivery of services through a standard contract Workgroup felt that this approach was required only where a service line is delivered in a non-competitive environment. Where there is genuine competition for the service provided by xoserve then conventional commercial arrangements would be used

7. 7 Code and non-code services A number of services equating to 10% of xoserve’s operating costs were carved out of PCR funding to be recovered through the User Pays service lines (circa £3.5 million in 2008 prices) Services split between Code and Non-code Code User Pays governed under UNC Non-code User Pays governed under a new multilateral framework contract and the User Pays User Committee –Published on the Joint Office website

8. 8 Current user pays non-code services The current non-code services provided to customers by Xoserve are; –Provision of Information Internet Access to Data (IAD) Telephone Enquiry M Number DVD MPRN E-mail –Registered User Portfolio Reports –AQ Enquiry –Administration of User Admission

9. 9 Over riding governance arrangements for non-code services Standard Special Condition A15 (SSC A15) of the Gas Transporter Licence UNC updated The charges and charging methodology are set out in the Agency Charging Statement and charges reviewed twice a year –Charging Statement published on Joint Office website Additionally the Agency Service Agreement obligates us to deliver services

10. 10 Specific governance arrangements for non-code services Industry met regularly to develop the contractual arrangements and its governance User Pays Non-code Contract User Pays User Committee Oversees service schedules Manages change to the services Monitors service performance Reviews ACS price changes and annual review User Pays Contract Expert Group Discuss the operation and development of the conditions of the contract Administration of the Contract Change Procedure

11. 11 Non-code services - What is working well Customers have adjusted their usage to the volume of service they require Services are being provided more efficiently –There has been a 22% reduction in real terms in the cost of providing non-code services New services are being provided through the non-code route – namely additional portfolio reports

12. 12 Non-code services - What is not working so well Not all customers have signed the non-code contract –They say other governance arrangements protect them, namely Code, the SPAA and Licence obligations User Pays governance meetings are not well attended Additional administration, governance and billing is disproportionate to the money involved (both for xoserve and shippers) GTs have received a request to move AQ Enquiry service to Code user pays Shipper customers’ comment: Could all user pays services be governed under the UNC or another existing arrangement –Single governance – time and cost efficient plus inclusive Many shippers prefer bilateral contractual arrangements for services outside of the UNC