1. UNC Modification 0213 – User Pays Governance Arrangements Simon Trivella – 19 th June 2008 Governance Workstream

2. Considerations Change Strategy –What does industry want to achieve, target issues, predict changes Change Definition –What are the objectives, drivers and requirements (avoid early solution focus) Change Effectiveness –Is there industry support and what can be done to improve it Change Priority –How do we prioritise change evaluation and delivery Change Parties and Providers –Are all parties / providers party to the governance process

3. What is a User Pays Modification Proposal Questions.. –Does the Proposal involve changes to GT systems –Does the Proposal result in an additional (or change to) GT service or process –Who are beneficiaries of the Proposal GTs Users Others Mixture –Are the GTs funded for implementation and operation of the change

4. Transporter and User Allocations Potential for no agreement on ‘beneficiaries’ Simple process required 5 basic possible allocations (Users : GTs) –100% : 0% (User benefit only) –75% : 25% (User benefit > GT benefit) –50% : 50% (approx equal benefit) –25% : 75% (GT benefit > User benefit) –0% : 100% (GT benefit only) Option for Alternative Proposals if no agreement reached

5. Transporter Cost Allocation Methodology Governance for GT cost allocation (funding and liabilities) –Joint Governance Arrangements Agreement (A12) –Agency Service Agreement (A15) 5 GT Cost Allocation ‘Pots’ used for Agency costs UKT : DNs –100% : 0% –20% : 80% –11% : 89% –0% : 100% –Ad-hoc Individual GT’s Requirement e.g. Changes to SIUs arrangements would be 100% SGN

6. User Allocation ‘Pots’ Similar process to GT Allocation to avoid ‘Class 3 Mod Syndrome’ –Small Supply Point count? –Large Supply Point Count? –AQ Proportions? –DM Portfolio? –Existing service / process usage? –Adhoc? Users to have appropriate governance arrangements to reach agreement –Not a GT issue although would be specified on a GT Proposal –Utilisation of existing group, Gas Forum? Option for Alternative Proposals

7. Cost & Implementation Timescale Analysis Panel decision on requirement for analysis pre DMR stage Early view from GTs on Proposal –Are Requirements, Assumptions & Business Rules clearly defined –What additional clarification is required Lead Representative (similar to SME) required to provide –What level of analysis can be provided Analysis, Investment and Transaction costs Tolerances Timescales (Initial Analysis, Full & Firm Analysis and Implementation timescales) Panel decision on delivery timescales –Ability to extend as necessary (change in scope, prioritisation etc.)

8. Cost & Implementation Timescale Analysis GT to cover cost of analysis if required pre DMR stage –UNC Panel decision Adequate governance and protection Reflects industry views –No additional funding mechanisms required (i.e. Joint Office) –Business as usual approach

9. Cost & Implementation Timescale Analysis Full & Firm analysis may be required for Consultation (DMR Stage) –Similar process to pre DMR stage UNC Panel decision Additional clarity maybe required –F&F costs recoverable if significant GTs to identify prior to analysis –If implemented: cost recovery based on ‘beneficiary’ proportions (User Pays Code Service) Defined period for collection –If not implemented: cost recovery based on ‘standard’ allocation basis (User Pays Code Service) Defined period for collection

10. Investment and Transactional Costs Investment Costs –Payable by defined Beneficiaries Ensures cost recovery All parties treated equally Early / late usage not discriminated against negatively or positively –Recoverable as User Pays Code Service over defined period of time Transactional Costs –Governed by ACS process (as is)

11. Next Steps Continue development of business rules –Gain industry agreement and support (where possible) Ensure solution is fit for purpose –Comparisons from electricity (cost provision) –Would the proposal work for previous Modifications? Additional issues to consider –Third Party Modifications Special arrangements required? –Urgent Modifications Can these be User Pays and if so how are they accomodated? ACS and Alternative Proposals –Will we be swamped, Is there a better way?

12. UNC Modification 0213 – User Pays Governance Arrangements Simon Trivella – 19 th June 2008 Governance Workstream