1. Modification 0410 questions Gareth Evans on behalf of Total Gas & Power

2. Overview Asked to come back with further thoughts on two key issues.  Thoughts on how costs for gas used by site are recovered.  Use of MPRN as a suitable trigger point.

3. Purpose of modification  Purpose of modification to ensure gas used by unregistered site is paid for by the organisation that created the connection (shipper or transporter).  Does not seek to apportion “blame.”  Two issues with any process to do this Identifying amount of gas used. Determining cost of gas used.  Time period gas is used is, in itself, not important.

4. Data items  Amount of gas used relatively easy to determine from meter reading (with assumptions of cv).  Determining the period gas flowed more difficult – meter fit date not always provided in all cases.  These practical issues drive solution.

5. Cost recovery mechanism  Proposal is to not re-apportion energy. Complex Period to reapply uncertain Different process for Shipper, Transporter  Instead proposal is that there is a financial re- apportionment (similar to AUGE process).  Therefore period in which gas was used less critical (as it will not affect balancing positions).

6. Cost recovery mechanism benefits  Period for determining costs less critical (as it will not affect balancing positions).  Allows equal treatment of all parties.  Does not rely on data that may not be available (meter fit dates etc).  Less complex system solution – no need to apply gas volumes to transporters retrospectively.

7. Gas use determination  When unregistered site discovered, estimate of total consumption obtained (ideally via meter reading) when site is resolved, or annually (12 months after MPRN creation)  Annual checkpoint process encourages resolution of site.  SAP determined by taking average over period between MPRN creation date and date site gas consumption estimated.  Alternative is to use annual reference price (e.g. ICIS Heren forward prices)

8. Cost recovery process  When unregistered site discovered, estimate of consumption obtained (via meter reading) when site is resolved, or annually (12 months after MPRN creation)  Volume of gas multiplied by average SAP to give charge to party who created MPRN.  SAP determined by taking average over period between MPRN creation date and date site gas consumption estimated.  Alternative is to use annual reference price (e.g. ICIS Heren forward prices)

9. Example 1 April 2010 01 Oct 2011 No Meter [1 July 2010] 0kWh [Meter Fit date] Consumption (from meter reading) 0kWh50,000 kWh MPRN Creation Site found consuming Reg consumption Average SAP = 1.81p/kWh Average SAP = 1.71p/kWh Annual Reference price (ICIS Heren) = 1.7 p/kWh 01 Feb 2011 Site registered 25,000 kWh Unregistered Consumption

10. Difference price  Charge averaging SAP to MPRN creation: (1.81p/kWh*50,000kWh)/100= £905  Charge averaging SAP to meter fit date: (1.71p/kWh*50,000kWh)/100= £855  Use annual reference price: (1.7p/kWh*50,000kWh)/100 = £850  Cf estimated cost to industry ~ £5.5m pa

11. Reallocation of monies  Annually (beginning of financial year) Transporter’s Agent will reallocate money collected through process to all Shippers in proportion of their market share as of 1 April.  Acknowledge that market shares will fluctuate throughout the year, but simplicity of the process will be of greater benefit than incurring greater cost of detailed market tracking process.

12. Contact Details  Happy to answer questions : Waters Wye Associates: Gareth Evans - 01473 822503 - 07500 964447 gareth@waterswye.co.uk www.waterswye.co.uk