1. PARCA: Contractual Overview TX Workgroup 27 th February 2013 Steve Pownall

2. 2 Purpose of today… Is to provide an overview of PARCA contract as follows:  Pre-PARCA Assessment (proforma)  PARCA Phased ‘Works’  Provision of capacity inc ‘fine tuning’  Customer fees and financial commitment  Information provision  Demonstration Data  Milestone Information

3. 3 …but before we commence..  Going forward, for the purposes of the proposed ‘PARCA’ contract /arrangements ONLY, we intend to use a simplified naming convention: Was Will become Works Stage 1a Phase 1 Needs Case/Technical Options Stage 1b Phase 2, Schedule A Strategic Options Stage 2 Phase 2, Schedule B Outline routing & siting Stage 3 Phase 2, Schedule C Detailed routing & siting / EIA Stage 4 Phase 2, Schedule D Proposed DCO Application Stage 5 Phase 2, Schedule E Submit DCO Application / hearings Stage 6 Phase 2, Schedule F Secretary of State decision Note: ‘Local Planning’ Works will be under Phase 2, Schedule G (to be defined)

4. 4 Pre-PARCA Assessment  Customer to provide the following information to National Grid:  Details of customer  Proposed project location including facility site and NTS connection site  Indicative capacity requirement (profiled if appropriate)  Indicative capacity upper/lower range – for ‘fine tuning’ purposes only  For DNO Users; Pressure and Flex requirements  Used to populate the PARCA data items prior to signature by both parties  We anticipate dialogue between the customer and National Grid prior to the submission of this information

5. 5 PARCA Phased Works - Overview (1) The PARCA Works will be contained within two Phases  Phase 1 - Needs Case & Technical Options  Where no NTS reinforcement is required the PARCA becomes primarily a customer ‘Demonstration Data’ contract up to point of capacity allocation  Phase 2 - Statutory Planning Works either:  National planning (Planning Act 2008) for Development Consent Order  Schedules A - F (please see below)  Or:  Local planning  Schedule G [to be defined]  Note: Where we identify NTS reinforcement that requires planning, this could be met through either build or through non-build alternatives e.g. commercial contract or a combination of both. We anticipate that a proportion of the Phase 2 Statutory Planning Works will still need to be carried out under an alternative to a full-build option.

6. 6 PARCA Phased Works - Overview (2)  Two natural ‘customer’ breakpoints  Following output from Phase 1  Customer to indicate whether it wishes to progress to Phase 2 - if NG indicates a Needs Case for NTS reinforcement  Where no NTS reinforcement is identified the customer will be required to pay a reservation fee; or the customer may bid through the capacity auction process  Phase 2 - following Secretary of State (or local authority) decision on our planning application  Customer may terminate PARCA Works at any time but liable for costs incurred (and committed) up to the point of termination

7. 7 PARCA Phase 1 Works: Establish Needs Case and Technical Options Phase 1Establish the Need Case and Identify Technical Options Up to 6 Months Establish and Document the Project Need Case for physical works Identification potential strategic options Apply technical filter Apply benefits filter Prepare Technical Options Report (& customer summary) - internal challenge & review, including legal counsel Milestone Information: Provide the customer with a ‘Phase 1 Works Report’ based on Needs Case outcome/Technical Options (if relevant)

8. 8 PARCA Phase 2 Works: Schedule A – Strategic Options works Phase 2 Schedule A Develop Strategic Options Report (SOR) Up to 6 Months Engage external resource (Environmental Consultants, Engineering consultants, Communications) to assist with Options Appraisal and SOR Engage with external stakeholders: - seek comments on strategic options being considered, including reasons for options discounted at technical and benefit filter. - agreement for OA topics scoped in and out Prepare Draft Strategic Options Report (SOR): - undertake Level 1 Options Appraisal using environmental consultants - internal challenge & review, including legal counsel Consult on Draft Strategic Options Report (SOR): - engage and consult with key stakeholders (workshops & presentations) - review & incorporate stakeholder comments Compile Final Revision of SOR - Including Recommendation Milestone Information: Provide the customer with an Project Update including SOR (recommendation), reconfirm NG project plan timescales

9. 9 PARCA Phase 2 Works: Schedule B – Outline Routing and Siting works Phase 2 Schedule B OUTLINE ROUTING AND SITING Identify Preferred Route Corridor / Siting Studies Up to 15 Months Develop SOCC (Statement of Community Consultation) Undertake RCIS (Route Corridor Investigation Study) Undertake Options Appraisal Level 2 Public Consultation on Route Corridors and Options Appraisal Level 2 Review of Public Consultation Identify Preferred Route Corridor: - prepare final Route Corridor Study and Level 2 Options Appraisal & Route Corridor Feedback Report Milestone Information: Provide the customer with an Project Update including Preferred Route Corridor/Siting Study report; reconfirm NG project plan timescales

10. 10 PARCA Phase 2 Works: Schedule C – Detailed Routing & Siting works Phase 2 Schedule C DETAILED ROUTING / SITING Undertake EIA (Environmental Impact Assessment) & Design Pipeline Up to 24 Months Identification of route alignments, involving thematic groups, community forums & routeing / siting workshops Undertake Options Appraisal (Level 3) and EIA (Environmental Impact Assessment) Undertake Pipeline Detailed Design to support: - Options Appraisal Level 3 - EIA on preferred pipeline alignment and AGI site Compile ES & Documents for Submission to NID (National Infrastructure Directorate) within the Planning Inspectorate Milestone Information: Provide the customer with an Project Update including Detailed Routing/Siting report, EIA outcome; reconfirm NG project plan timescales

11. 11 PARCA Phase 2 Works: Schedules D, E and F Phase 2 Schedule D PROPOSED DEVELOPMENT CONSENT ORDER (DCO) APPLICATION Formal consultation, finalising project, preparation of application documentation Up to 6 Months Formal consultation on project, in accordance with agreed SOCC Review feedback & adjust / finalise project Finalise: - land rights offers - DCO documentation, including legal counsel review Phase 2 Schedules E & F DCO APPLICATION AND HEARINGS Planning Act Submission, Examination and Approval Process Up to 15 Months Submit Application to NID (National Infrastructure Directorate) within the Planning Inspectorate, NID validates application, register and publish Consideration of application by Commissioners (written representations or public hearing) NID report and recommendation to Secretary of State Decision from the Secretary of State for Energy and Climate Change Milestone Information: Provide customer with update ‘report’, reconfirm NG Project Plan timescales, as necessary for each schedule

12. 12 Provision of Capacity timeline (1)  Effective Date (ED):  At which the customer and National Grid sign the PARCA  From which National Grid agrees to undertake Phase 1 Works – will require the customer to pay the fee prior to commencement of the Works  Reservation Date (RsD):  The customer will have its capacity requirement reserved  Allocation Date (AD):  The customer (where not a User) must have nominated one (or more) User(s) up to 1 month prior to this date  The default date that is between 24 and 35 months prior to the Registration Date  Registration Date (RgD):  Date from which the User holds the capacity

13. 13 Provision of Capacity timeline (2) RsD Capacity allocated to the User NPV (entry only) RgD AD PARCA: Phase 1 Works  Price  NPV (entry only)  Quantity (& range) reservation fee or security due  Capacity ‘tagged’ in Gemini from this date and no longer forms part of unsold. Date PARCA signed by the customer and National Grid Default Allocation Date is between 24 and 35 months prior to the RgD Nominate user up to 1 month before AD Reservation Date (RsD) Allocation Date (AD)Registration Date (RgD) Date from which the User holds the capacity Effective Date (ED) ED

14. 14 Provision of Capacity & ‘fine tuning’ Fine tuning of customer’s capacity requirement:  Customers have requested the flexibility to ‘fine tune’ their capacity requirement prior to the capacity Allocation Date  As a project progresses, a customer will have more certainty as to its ‘final’ capacity requirement: linked to a number of factors e.g. chosen turbine manufacturer  We understand that capacity fine-tuning is an important customer consideration  Fine tuning will be allowed within an agreed upper and lower range  Pre-PARCA Assessment proforma  We will require the customer to provide demonstration data to support its request to fine tune its capacity requirement

15. 15 Customer fees and financial commitment (1) PARCA Phase 1 (Needs Case and Technical Options) Fee  Customer will fully fund the PARCA Phase 1 Works: fee approx £120,000 ~ £150,000 – similar principles to 0373 NTS Connection (excluded service, cost pass through)  Fee reconciled against outturn costs with ££ difference refunded to, or recovered from, the customer PARCA Phase 2 (Statutory Planning Works) - securitisation  Where Phase 1 Works identifies either:  Requirement for physical NTS reinforcement and, Local or National planning consent is required or;  Use of a commercial contract can be utilised to meet the customer’s capacity requirement then:  The customer will securitise 100% of the proposed Pre-Capacity Allocation Revenue Driver (see last TX Workgroup PARCA Funding presentation for details)

16. 16 Customer fees and financial commitment (2) Capacity Reservation Fee  This could be applied following the completion of PARCA Phase 1 Works, where the customer’s capacity requirement will be met entirely through existing system capability  In this scenario, the customer may secure its capacity requirement either by bidding in the capacity auction or by reserving through the PARCA  The Capacity Reservation Fee could be calculated:  Following PARCA Phase 1 Works and customer agreeing that it wishes to progress its project  The Capacity Reservation Fee will be calculated based on (to be discussed in March TX Workgroup)

17. 17 Post Capacity Allocation RD triggered RD* added to Allowed Revenue and charged to industry via Transportation Charges Pre-Capacity Allocation Revenue Driver triggered and profiled over 4 years PARCA Funding (revised for ‘Phases’) Proposal for a Planning Act 2008 project Phase 1 Works Phase 2 Works NTS Investment: Project Needs Case / Technical Options NTS Reinforcement (or other commercial method) required All costs charged to PARCA Signatory Classified as 100% Excluded Services – no impact on Allowed Revenue Invoiced up front and reconciled Pre Capacity Allocation Revenue Driver triggered RD* added to Allowed Revenue and charged to industry via Transportation Charges. PARCA Signatory securitises value of RD *Value of RD’s are reconciled with actual costs, reconciliations through Transportation charges. Strategic Options Schedule A X X Post-Capacity Allocation RD triggered & profiled over 3 yrs Pre Capacity Revenue Driver runs up to DCO X X Post-Capacity Allocation Revenue Driver calc’d during Phase 2 Appendix 3 Funding / Charging PARCA Phase Pre-Capacity Allocation Revenue Driver calculated by end of Phase 1 Outline Routing & siting Schedule B Detailed EIA Routing & siting Schedule C Proposed DCO Application Schedule D DCO Application and hearings Schedule E DCO submission & SoS decision Schedule F

18. 18 Information Provision Demonstration Data (from customer)  Please see overview…  Most categories seem to be required towards the end of the PARCA process e.g. Phase 2, Schedules E, F  We would appreciate views (please!) from all categories of our customers e.g. entry, storage and exit as to whether there might be additional items PARCA Phased Works – Milestone Information (from National Grid)  Please see overview…  The proposed categories of information that customers will receive from National Grid are aligned to the PARCA Phased Works and associated milestones  Is there any other additional information that customers might wish to see from National Grid?

19. 19 And finally… Do you have any further questions, comments?