1. AQ Overview

2.  Annual Quantity (AQ) is a value held for each meter point that reflects the expectation as to the volume of gas that a meter point will consume within 1 gas year. The AQ is derived from historic consumption and consumption patterns to derive the most accurate AQ  AQs or derivatives of AQ, are utilised in many xoserve and Shipper processes, including:  Network Analysis & Planning  Energy Balancing  Safety  GT Pricing  Billing / RbD & Transportation Charges  Read Frequency  Emergency Contacts  Site Classification AQ – Definition

3.  RMQ – Relevant Metered Quantity Calculation:  (Read 2 – Read 1) * Asset * CV Value (No. Of Days * 365)  * Calculation of Consumption Only – Not AQ  Actual Uniform Network Code Defined xoserve System Calculation (H.3.4.1): 1: AQ System Calculation : The Uniform Network Code Defined AQ Calculation (NDM Only) RMQ: Relevant metered Quantity or Consumption based on Reads and Asset INCLUDES: Actual CV values and not default value CWAALP: Cumulative Weather Adjusted Annual Load Profile Includes Daily Adjustment Factors, Load Profiles, Normal Seasonal Variables, Weather Sensitivity etc. for both actual and forecasts UNWC Section: H.3

4.  AQ System Calculation will use any valid read on xoserve systems.  Aim to identify erroneous AQ calculations.  System Calculation starts in April each year.  If system is unable to determine 2 reads within specified parameters, AQ will be Carried Forward – same AQ Value for previous Gas Year will be applied in next Gas Year.  Manual Analysis will take place on:  Threshold Crossers  LSP AQ Calculation  WC Calculation  Primes & Subs 1: AQ Calculation : Important Points

5.  1 Years Consumption for DM sites is 365 Days (or 366 days for Leap Years) Section 1: AQ System Calculation Daily Metered (DM) AQ Calculation UNWC Section: G.1.6.2 Consumption 1 Start Read Consumption 2 End Read DM Consumption: 1 YEAR System Calculation Date  Reads on a day denote the end of the previous days consumption, therefore consumption 365 (End Read) will be derived from the read on day 366  DM AQs are NOT Adjusted to seasonal normal temperature (NDM AQs are)

6. 1: AQ System Calculation: Non-Daily Metered (NDM) AQ Calculation UNWC Section: H.3  All Reads used in System AQ Calculation have to be within 3 years of the calculation date.  End Read is the latest dated valid read prior to the system calculation  Target Read Date (Start Read) is End Read minus 50 weeks for Monthly Read Meters, 42 Weeks for Non-Monthly Read Meters  Start Read is the latest valid read prior to Target Read Date (but not less than 3 years since calculation date) OR if no valid read exists before the Target Read Date, the earliest dated read after the Target Read Date BUT before the End Read minus 6 months & 1 day  If no valid read exists earlier than the End Read minus 6 months and 1 day, no AQ calculation will take place, current AQ will be carried forward D - 3Years System Calculation Date End Read Target Read Date NDM Consumption End Read minus 42 / 50 Weeks Start Read OR Start Read Read 2 minus 6 Months & 1 Day

7.  Aprilxoserve Recalculates SSP Meter Point AQs  Mayxoserve Recalculates LSP Meter Point AQs  Mayxoserve Recalculates Meter Point Winter Consumptions (WC)  By June 6 th All SSP & Threshold Crosser T04 Notification Files Released  June 7 th SSP AMENDMENT WINDOW OPENS  By June 30 th All LSP T04 Notification Files Released  July 1 st LSP AMENDMENT WINDOW OPENS  July 31 st AQ Appeals Window Closes  August 13th Last Day For Shipper Amendment Files  September 1 st Supply Point Revision Commences  September 14 th NRO / NRL Files Released to Shippers (S91, S92, T68)  September 15 th Appeals Window Opens  October 1 st AQs IMPLEMENTED AQ Timetable

8.  An AQ Amendment is a challenge by the owning Shipper to change the AQ Value to be applied on 1 st October  Shipper is challenging the data that xoserve has used to calculate AQ by using new or more valid data  Amendments occur during the AQ Review period ONLY  If the amendment is Accepted, the amended AQ will go live automatically on 1 st October  If the amendment is Rejected, the xoserve calculated AQ will go live on 1 st October Section 3: AQ Amendments UNWC Section: G.1.6

9.  1: Reads  An Amendment can be submitted where:  The Read/s used by xoserve are incorrect therefore resulting in an erroneous calculation -The Shipper has more recent reads available than those used by xoserve  2: Meter Asset Discrepancy  An Amendment can be submitted where:  xoserve has calculated the AQ using incorrect MATERIAL asset data. This Includes: Imperial / Metric Indicator No. of Dials No. of Units Correction Factor -Each of the above will have a direct impact on the calculated AQ In addition to the Amendment, the Asset change should be submitted to xoserve to ensure future accuracy of consumption and AQ calculations 3: AQ Amendments: Reasons For Amendment UNWC Section: G.1.6

10.  3: Carry Forwards  xoserve has been unable to recalculate the AQ & the current AQ is applied. Reasons for Carry Forwards can include:  xoserve has been unable to calculate an AQ due to a lack of consumption history  Analysis has determined that the proposed AQ may be erroneous For Amendments where the Supply Point is a Smaller Supply Point and will remain as a Smaller Supply Point (<73,200):  Amended AQ must change by +/- 20%  The Shipper requested AQ is measured against the xoserve proposed AQ (not current AQ)  Amendments within this tolerance will be automatically rejected N.B: Uniform Network Code states: Focus of Amendments should be balanced: Amendment requests should reflect the true, seasonally adjusted, annual consumption anticipated at the Supply Meter Point requiring increases as well as reductions in the AQ 3: AQ Amendments: Reasons For Amendment UNWC Section: G.1.6

11. AQ Amendments Total AQ Amendments Received2,521,057  Total Accepted2,372,206 (94.1%)  Total Rejected148,851 (5.9%) - Inclusive of Referrals Total Referrals12,647  Total Accepted4,943 (39.1%)  Total Rejected7,704(60.9%) AQ Review 2007

12. Meter Points Calculated Large Supply Points Total Meter Points Calculated 421,704  Current Energy 268 TWH  First Sweep calc 272 TWH *  xoserve Calculated Energy 260 TWH  Final Applied Energy 01/10 251 TWH (Incl. 4.5 TWH SSP - LSP – 39,106 M.Points) Small Supply Points Total Meter Points Calculated 21,080,879  Current Energy 399 TWH  First Sweep calc 402 TWH*  xoserve Calculated Energy 395 TWH  Final Applied Energy 01/10 385 TWH (Incl. 2.3 TWH LSP - SSP – 51,491 M.Points) * = Approximate figures AQ Review 2007

13. SSP Energy Movement Small Supply Point (Domestic) Movement AQ Review 2007

14. WHAT IS AN AQ APPEAL?  An AQ (Annual Quantity) Appeal is a challenge to the current AQ value on UK Link.  The AQ Appeals window is open from 15th September until 31st July  Applies to the following categories of site  Large Supply Point to Large Supply Point Changes  (>73,200 to >73,200)  Small Supply Point to Large Supply Point Changes  ( 73,200)  Large Supply Point to Smaller Supply Point Changes  (>73,200 to < 73,201)  Small Supply Point to Small Supply Point changes cannot be Appealed

15. AQ Appeal: Process Flow Can An AQ Appeal Be Raised? Can an AQ Appeal be raised? Shipper determines current AQ value is not reflective of actual consumption Shipper unable to raise AQ Appeal – AQ will be recalculated during next AQ Review – Shipper will have opportunity to raise Amend Shipper Submits Speculative Calculator Request File:  ASI File  T19 Record Shipper Submits Speculative Calculator Request File:  ASI File  T19 Record Spec Calc File Rejected with Rejection Reason:  ASO File will include S72 Rejection Record Spec Calc File Rejected with Rejection Reason:  ASO File will include S72 Rejection Record Shipper Receives Recalculated AQ Value Is AQ Acceptable? Shipper Submits Appeal File as Per Spec Calc Response File:  API File  T17 Record Shipper Submits Appeal File as Per Spec Calc Response File:  API File  T17 Record xoserve Responds to Appeal File to Shipper: APO File T18 Record AC, RJ or RF Outcome xoserve Responds to Appeal File to Shipper: APO File T18 Record AC, RJ or RF Outcome Amendment File Rejected with Rejection Reason:  APO File will include S72 Rejection Record Amendment File Rejected with Rejection Reason:  APO File will include S72 Rejection Record Shipper Receives Appeal File and submits re-nomination & confirmation using Appeal Reference NO YES xoserve Responds with Speculative Calculation Response File to Shipper: ASO File T20 Record AC or RJ Outcome xoserve Responds with Speculative Calculation Response File to Shipper: ASO File T20 Record AC or RJ Outcome NO YES Is AQ Acceptable? REJECT ACCEPT REJECT ACCEPT AQ Goes live on xoserve System on Confirmation Effective Date

16. Exceptions  Manual Appeals – Non confirmed supply points where the incoming shipper disagrees with the prevailing site AQ  BTU Forms  New Business Appeals – Where RSU picks up a site and believes AQ to be incorrect.  MOD99 – Again on shipper transfer where a domestic property has an AQ above the LSP threshold (73,200 KwH per annum.)  Manifest Errors – Where there is a dramatic change in supply point usage. (E.G. site has closed or built a new CHP system etc.)

17. Appeal Activity 2007 – January to October N.B. The appeals window was closed from 31 July to 15 September 2007. AQ Review 2007

18. Issues  Xoserve’s role  Change to xoserve workload - Flatter profile  Amendments would no longer exist.  Current process relies on xoserve impartiality  No xoserve manual review before AQ reset  Potential increase in meter read traffic. (Limit of 400,000 meter reads per day.)  Changing the AQ.  There could be more Appeals spread through the year.  There could be a dramatic increase in read replacement activity  Poor quality RGMA flows mean:-  Erroneous reads could load.  Correct reads fail to load.  How will read replacement work?  A single read can be replaced up to 99 times  Does this mean that the AQ can be altered 99 times?  Does this open up gaming issues.  Replacement cannot be retrospective from an energy perspective  Reconciliation would take place back to date of original reading

19. Issues 2  Reconfirmation process.  Would need to be at least 14 days before AQ could go live.  NRL/NRO files to be issued  Impacts on Gemini.  Issues on shipper transfer.  Potential to change AQs at a given point in time (E.G. Monthly, Quarterly)  Which reads should be used to drive AQ changes?  Cyclic  Read replacements  OSER  POS Opening reads  Not OPNT estimates  Shippers could chose which meter reads to submit.  Funding. Who pays?  Networks  User Pays  Demand Estimation