1. UNC Modification Proposal 0116 Reform of the NTS Offtake Arrangements Transmission Workstream 5 th October 2006

2. Bi-Directional Sites – Current arrangements  End of day exit Daily Quantities (DQ) and User allocations (UDQOs) provided to National Grid NTS e.g.  Exit DQ = 10, UDQO User A = 2, UDQO User B= 8  Same process undertaken for end of day entry quantities  End of Day Net Physical measurement provided  National Grid NTS check difference between Exit and Entry measurements equals end of day net physical measurement

3. Bi-Directional Sites – Proposed Enduring Arrangements  Existing end of day processes continues for entry and exit  Step 1. Flex Overruns only calculated if cumulative net exit physical flow over first 16 hours  Step 2. Cumulate flow over 06:00 to 22:00 Exit Daily Quantity (DQ 22:00 ) and User allocations (UDDQ 22:00 ) provided to National Grid NTS e.g.  Exit DQ 22:00 = 6, UDDQ 22:00 User A = 1, UDDQ 22:00 User B = 5  DQ 22:00 must be no less than the cumulative net exit physical flow at 22:00  Step 3. User exit allocations (UDQO and UDDQ 22:00 ) utilised in Flex Overrun calculation

4. Negative Flex Flow Example 1 22.00 06.00 End of Day Measurement = 7200 300 User has 0 Flexibility holding and -160 Flexibility Utilisation. Overrun = -160 – 0 = -160 = NO Flexibility Overrun User has 0 Flex Holding, if they wish to Flow an “anti-diurnal” profile no Requirement to purchase Flexibility 290

5. Negative Flex Flow Example 1 22.00 06.00 End of Day Measurement = 7200 300 User must flow less than or equal to 4640 at 22.00 to ensure that no Flexibility Overrun is incurred Users Flexibility Holding = -160 Users Flex utilised = 4640 – 4800 = -160 -160—160 = 0 NO Flexibility Overrun User Trades or sells back to NTS 160 units 290

6. Pressure Commitments – Transitional Arrangements (Mod 046)  Assured Offtake Pressures rolled over from interim to transitional regime  based on 2005 Offtake Capacity Statement  remain at this level until Sept 2010 unless amended as a result of a request  DNOs able to request pressure increase by end of July in conjunction with their capacity requests  National Grid NTS accept/reject pressures and capacity requests by end of September as part of Offtake Capacity Statement

7. Pressure Commitments - Proposed Enduring Arrangements (Mod 0116)  Assured Offtake Pressures rolled over from transitional to enduring regime  based on Sept 2006 Offtake Capacity Statement  remain at this level unless amended as a result of a request  DNOs able to request (permanent) pressure increase by end of July in conjunction with their capacity requests, but capacity requests via annual flex auctions  National Grid NTS accept/reject pressure increase by end of September as part of Offtake Pressure Statement

8. Pressure Commitments - Proposed Enduring Arrangements (Mod 0116)  National Grid NTS ability to request (permanent) pressure decreases  requests by end of April  DNO accept/reject by end of July  Ability for National Grid NTS and DNOs to request temporary decreases for a day or days  Accept/reject within 10 days  Common test for acceptance/rejection of any pressure request, based on current arrangements  Safe and efficient operation of Transporter’s network  Obligation to co-operate

9. New Connections – Current Arrangements  Developer discusses with National Grid NTS its connection requirements through “connection process”  States anticipated capacity requirements  National Grid NTS considers whether requires investment  If so, may seek to agree terms of ARCA and delivery date  ARCA required to be agreed to allow sufficient investment lead rime  Where ARCA agreed, Shippers able to book prevailing rights from relevant month consistent with delivery date through SPA process  Shippers not able to request additional capacity beyond 6 months under UNC via SPA process, irrelevant of whether triggers investment

10. New Connections – Proposed Enduring Arrangements  Developer discusses with National Grid NTS its connection requirements through “connection process”  Obtain relevant NTS Exit Zone and NTS Exit Area (as defined in ExCR Methodology Statement)  States anticipated capacity requirements  National Grid NTS considers whether requires investment  If so, may seek to agree terms of ARCA and delivery date  ARCA required to be agreed to allow sufficient investment lead rime  Investment lead times will be consistent with obligations agreed as part of the TPCR  Where ARCA agreed, Shippers able to book  for agreed non-Gas Year start dates, daily rights through daily auctions  prevailing annual rights from relevant Gas Year – nominated Shippers deemed to have booked capacity under UNC at relevant Application Window  Also, any User able to request additional flat capacity at Annual Application Window for unconstrained period for use from start of a Gas Year

11. New Connections – Proposed Enduring Arrangements  Initialisation rules rollover capacity bookings from Transitional to Enduring Arrangements  DNOs based on Sept 2006 Offtake Capacity Statement  Shippers based on Gas Year 2005/06 bookings  Require to clarify in rules that same will apply to any agreed Reserved Capacity through ARCAs  only those under current negotiation and where agreed by implementation of the proposal

12. NTS/LDZ Operational Flows – Proposed Enduring Arrangements  Reciprocal arrangements provided to DNOs for flow swapping i.e.  DNO’s able to request flow swaps from National Grid NTS in accordance with same rules as under UNC OAD I2.4 for National Grid NTS to request flow swaps from DNOs

13. Exit Capacity Release Methodology Statement – User Commitment

14. User Commitment Option 1. Commitment Based on Prevailing Prices  National Grid will accept User applications, subject to appropriate credit checks, made at Annual Application Window in Gas Year Y to increase Prevailing NTS Exit (Flat) Capacity to amount “Q” on basis that  User will pay relevant NTS Exit Capacity charges for amount Q for each Gas Day over the period Gas Year Y+4 to Y+7 (inclusive)  NTS Exit Capacity charges as published in Transportation Statement for relevant Gas Days

15. User Commitment Option 2. Commitment Based on Prices at time of application  National Grid will accept User applications, subject to appropriate credit checks, made at Annual Application Window in Gas Year Y to increase its Prevailing NTS Exit (Flat) Capacity to an amount “Q” on the basis that the User will:  pay to National Grid at least the User Commitment Amount; and/or  hold the amount Q for each Gas Day over the period Gas Year Y+4 to Y+7 (inclusive)  User Commitment Amount will be determined as follows: User Commitment = P x Q x F x 365, where  P = relevant prevailing NTS Exit Capacity charge at the time of application (p/kWh)  Q = total amount of Prevailing NTS Exit (Flat) Capacity held by the User (kWh)  F = factor of 4