1. EU Workgroup – Mod 500 WG(4) – 16 th September 2014

2. Surrender Cash Flows 2

3. CMP cash flows for Surrender & LT UIOLI - Proposal  Surrendered and LT UIOLI offered in an auction will have their own quantity holders in the Gemini system.  This means revenue received from Surrenders/LT UIOLI can be identified and treated separately from standard baseline or incremental revenue sales.  Same principles applied to CMP surrender and LT UIOLI as are applied to TnT.  Costs/Revenues will not be counted in National Grid’s SO or TO actual or maximum allowed revenue.  Also will not be included in Constraint Mgt Incentive. 3

4. CMP cash flows for Surrender & LT UIOLI - Proposal  Debit paid by a User will be a relevant revenue to capacity neutrality.  Credit received by a User will be a relevant cost for capacity neutrality.  User Debit ≥ User credit  zero impact or net revenue to neutrality.  Any net revenue will be redistributed to community via neutrality mechanism.  This means net revenue from an Exit transaction will be redistributed through neutrality (based on entry holdings).  NG will always be cost/revenue neutral.  NG will monitor Exit costs/revenues going through neutrality. 4

5. Surrender Price 5

6. Slide presented to WG(1)  Allocate bundled results first:  Unsold > Surrenders > LT UIOLI > Oversubscription  Then allocate unbundled results:  Remaining unsold > remaining surrenders > remaining LT UIOLI > remaining oversubscription  This way all unsold must be used before re-allocating surrenders; all surrenders before LT UIOLI; and all LT UIOLI before non-ob. unsoldSurrenderLT UIOLINon-Ob USLO  Auction results come back from PRISMA. - Bundled bid demand - Unbundled bid demand

7. For 1:2 situations  There are 2 possible clearing prices for the bundled auctions.  This means that, if the Surrender is re-allocated to meet demand from a bundled auction, there are 2 possible prices that can be credited to the surrendering shipper,. 7 unsoldSurrenderLT UIOLINon-Ob USLO - Bundled bid demand – bundled auction A (5p) - Bundled bid demand – bundled auction B (3p)

8. Surrender - minimum quantities 8

9. Minimum Surrenders – PRISMA feedback  Fundamental functional changes  New ‘conditionally available’ type of auction and process for handling the surrenders would have to be developed.  Enhanced Surrender functionality (and possibility of PRISMA storing Surrender data).  Auction publishing would be amended  Process would need a lot of multi-lateral discussion e.g. Impact on adjacent TSO if Available capacity dropped.  Would auctions be re-run without conditional amount, if the minimum amount is not met. Could impact timetable for auctions.  Long term auction could jump from undersell back to oversell if a Surrender offer dropped out.  Non-competing auctions could move into competition.  Competition tree algorithm is already complex 9

10. LT UIOLI Guidance Document 10

11. LT UIOLI Guidance Document v2.0 draft 11

12. Contingency 12

13. 13 Background - Existing Arrangements  Section U – UK Link  U 6.1.1 b) – Code Contingency is specifically defined as an event or circumstance affecting UK Link.  PRISMA not part of UK Link  Where a Code Contingency continues for a certain period of time then it may be a Class A Contingency  Under Class A Contingency then standard arrangements under TPD may be amended.

14. 14 Class A Contingency (existing) - Capacity  Section B 2.16  2.16 a) Where…no capacity allocations of Daily NTS Entry Capacity in respect of a relevant Day are made…the System Entry Overrun Charge payable by Users…will not apply.  2.16 b) and c) relate to Contingency Arrangements for relevant processes (Registration, Surrender, Trading). NG still require system (Gemini) access to enact these arrangements on behalf of shippers.  PRISMA is a web based system so not possible for NG to have system access if other parties do not.

15. Contingency Arrangements  Wait and See approach initially;  Do not declare contingency unless outage is prolonged.  If Gemini offline, and Code Contingency declared:  NG can manually upload available capacity to PRISMA.  From shipper perspective auctions will continue.  If PRISMA offline:  Long term auctions will be held when system back online.  Short term auctions will recommence when system back online.  Existing Class A Contingency under 2.16 a) to be applied if outage is prolonged. 15

16. Recap 16

17. Summary of Topics covered so far  Long Term Auctions – Ascending Clock (WG1 & 3)  Short Term Auctions – Uniform Price (WG1 &3)  CAM auction products (WG1 & 3)  Joint Booking Platform – PRISMA (WG1 & 3)  1:2 situations & Competition (WG1 & 3)  Available Capacity & Bundling (WG1)  CMP: Surrender (WG1 & 3)  CMP: LT UIOLI (WG1)  Transfers (WG1 & 3)) 17

18. Summary of Topics covered so far (2)  Scalebacks & buybacks (WG2)  Voluntary Bundling (WG2)  Transitional Arrangements (WG2)  Mod 3.13 – Further References in UNC (WG2)  Tariff Arrangements – (WG4) 18

19. Summary Changes to UNC Modification Proposal 0500 19 section in moddescription 2 - Why changeremoved some of the repetition between sections 1 and 2 3.1 - New Termsdeleted part of definiton relating to unbundled capacity 3.1 - New Termsdefinition of NTS IP Capacity simplified 3.1 - New Termsdefinition of unbundled capacity changed to '…not bundled' 3.1 - New Termsrevised definition of Large Price Steps and Small Price Steps. 3.1 - New Termsadded definition for 'Oversell' 3.2 - Generaladded rules on with-holding Technical Capacity 3.2 - Generalsharing factor will not be stated in UNC (except for default rule) 3.2 - Generalconversion from kWh/d to kWh/h shall be 1/24th for all auctions 3.3.8 - Ascending Clockadded volume bid rules following First Time Undersell 3.3 - Ascending Clockextra information about setting Price Step removed, not required in UNC. 3.3 - Competing AuctionsSection largely redrafted to add clarity to process 3.3.24 - Ascending Clockadded rule on auction time out 3.4.3 - Uniform Price Algorithmadded rule on automatic roll forward of bids for day ahead auction 3.4.5 - Uniform Price Algorithmadded rule on minimum bid price 3.4.13 - Uniform Price Algorithmparagraphs 13) and 14) amalgamated 3.4.15 - Uniform Price Algorithmamended to cover scenario where some available capacity remains, but can't be allocated as doesn't meet min quantities 3.4.1.6 - Day Ahead IP Auctionadded rule on automatic roll forward of bids 3.5 - Surrenderdeleted 'next' for Annual Quarterly and Rolling Monthly auctions 3.5 - Surrenderadded wording to allow NG to process Surrender in event that adjacent TSO does not use PRISMA process 3.5 - Surrenderextended negative entitlement check 3.5 - Surrenderallocation is bundled first; unbundled second 3.5.12 - Surrenderadded rule about supremacy of gemini data 3.7 - Scalebackclarified that last in is first out in event of scaleback variousmin bid quantity for kWh/h added to Asending Clock, Uniform Price and Surrenders. (100,000/24 = 4,167)