1. Moving the QSEC and AMSEC Auctions National Grid NTS, Transmission Workstream

2. 2 Background  Last Year National Grid NTS raised Modification Proposal 0189, proposing that the QSEC auction be moved from September to April  Proposal itself received broad support but some concerns expressed, particularly around uncertainty surrounding baseline reconsultation and substitution  Proposal was rejected but Ofgem indicated that they would support a March auction  National Grid NTS now intends to bring forward another Modification Proposal to change the timing of QSEC and also AMSEC

3. 3 Proposal  UNC currently requires that National Grid NTS releases quarterly capacity in September for Y+2 to Y+16 and monthly capacity in February for Y+1 and Y+2  Discharged through the QSEC and AMSEC auctions respectively  National Grid NTS proposes changing this so that quarterly capacity is released in March for Y+2 to Y+16 and monthly capacity is released in August for Y+1 and Y+2  Also propose that definition of ‘Y’ (Capacity Year) be changed from 1 April – 31 March to 1 October – 30 September  Change would be effective from 1 April 2009

4. 4 Reasoning  Align the release of long term NTS Entry Capacity with the start of the Gas Year i.e. the start of the winter period, when flows increase  To enable full use of the final summer build period prior to incremental capacity delivery for construction activities  Timely delivery of capacity reduces risk of gas being stranded offshore and investment-related buybacks  To allow signals received through the QSEC auction to feed into the Transporting Britain’s Energy (TBE) consultation, which would enhance that process  To allow signals received through the QSEC auction to feed into the enduring exit reform auction / application processes which would improve network analysis / planning  Allow timely transition to the new regime and for issues currently being debated by industry (e.g. Review Group 221) to be resolved prior to the next QSEC auction

5. 5 Timeline  Proposal to be raised at October Mod Panel and progress through normal governance procedures  Would be implemented from 1 April 2009  In practice this would mean that AMSEC would be held in February 2009 as normal then the change would take effect so another AMSEC would be held in August 2009 and QSEC would take place in March 2010  Consequently there would be no QSEC auction in 2009, which may be seen as a disadvantage, although the six months’ worth of capacity that would have been available in a September 2009 QSEC (if there were no change) that would not be offered in a March 2010 QSEC would be made available in the August 2009 AMSEC  This is demonstrated on the next slide (September 2009 QSEC capacity release timings included for information only)

6. 6 Capacity Release Timeline Feb 2009 AMSEC Aug 2009 AMSEC Sept 2009 QSEC (if no change) Sept 2009 QSEC Incremental (if no change) Mar 2010 QSEC Mar 2010 QSEC Incremental Apr-Sep 2009 Oct-Mar 2009/10 Apr-Sept 2010 Oct-Mar 2010/11 Apr-Sept 2011 Oct-Mar 2011/12 Apr-Sept 2012 Oct-Mar 2012/13 Apr-Sept 2013 Oct-Mar 2013/14 Apr-Sept 2014 Oct-Mar 2014/15

7. 7 Proposed Next Steps Proposal discussed at Mod Panel16 October Issued for consultation17 October Close out for representations 7 November Mod Panel Vote20 November Submission to Ofgem21 November Questions?