1. Mod 0262 - Clarifications Transmission Workstream 6 August 2009

2. 2 Background  UNC mod proposal 0262 “Treatment of Capacity affected by Force Majeure”, brought forward by National Grid NTS proposing:  introduction of a Force Majeure Rebate to Users at a Network Point where FM has been declared: the FM quantity prorated between those Users registered as holding capacity at the affected point taking into account Unsold Capacity. application of a WAP of each Users registered capacity holdings multiplied by the prorated quantity Applicable to Capacity only but includes both NTS Entry & NTS Exit (Flat) Capacity  National Grid NTS to recover the rebate via the appropriate TO/SO Commodity charge  a reduction (when required) in the Users entitlements, by the prorated quantity, at zero price  Proposal taken to July mod Panel with a request that it be issued for consultation. Panel decision was to refer back to Transmission Workstream for further discussion/clarification

3. 3 The mod panel asked for clarification on the following..  What is the planned mod implementation date? 1 October 2009  Can Legal Text be provided We have requested suggested legal text & it will be provided at the earliest opportunity.  How would this apply to DNOs The proposal will only apply to DNOs, as a User of the NTS, from 1 October 2012 (Enduring NTS Exit Regime), this is implicit in the proposal as the mod only refers to Annual NTS Exit (Flat) Capacity and makes no reference to NTS Exit Capacity.

4. 4 Clarifications ctd…  What would happen if the User failed to respond to National Grid NTS’ request for Buyback/Forward Offers Such a failure would put the User in breach of their UNC obligations, National Grid NTS would expect this in itself to be sufficient to ensure compliance.  The mod appears to indicate that silence can be deemed as acceptance, is this acceptable under contract law? National Grid NTS has sought legal clarification on this point and will either provide an opinion at the workstream or amend the Proposal beforehand.

5. 5 Clarifications ctd…  How would the FM Rebate be calculated? The FM rebate will be calculated individually for each User, National Grid NTS would expect the legal text to contain an equation similar to the following: where: nis the number of successful capacity bids Pis the bid price for each successful capacity bid Qis the amount of capacity allocated pursuant to each capacity bid

6. 6 How would the FM Rebate be calculated? 4 Steps Required: Step 1 -Calculate the Adjusted FM amount FM amount – Unsold Capacity – any Daily Firm Capacity sold on the day of the FM notification Step 2- Calculate the Prorated Amount Users entitlement @ ASEP / Sold Quantity @ ASEP * Adjusted FM Amount Step 3 – Calculate WAP Sum of each successful bid * bid price / Users Registered holding Step 4 – Apply WAP to prorated Amount WAP * Prorated Amount

7. 7 Example ASEPX FM Notice Issued1 August Duration 1 Month (31 Days) Obligated Level500GWh/day FM Amount100GWh/day Unsold Capacity50GWh/day Number of Users4

8. 8 Step 1 – Calculate Prorated amount Shipper Users Registered Holding GWh/day Sold Quantity GWh/day Adjusted FM Amount GWh/day Prorated Amount GWh/day A1004505011.11 B1504505016.66 C904505010.00 D1104505012.22 Step 2 – Calculate Prorated amount FM Amount GWh/day Unsold Capacity GWh/day Daily Firm Capacity sold on day of FM notification Adjusted FM amount 100500

9. 9 Step 3 – Calculate WAP Shipper Users Registered Holdings GWh/day BIDS GWh/day Bid Prices Bid Value A100300.0079237000 250.0082205000 450.0085382500 B150600.0079474000 500.0081405000 400.0085340000 C90400.0079316000 350.0085297500 150.0091136500 D110550.0079434500 450.0083373500 100.008989000 ShipperWAP A0.0083 B0.0081 C0.0083 D0.0082

10. 10 Step 4 – Apply WAP to prorated quantity Shipper Prorated Amount GWh/day WAP FM Rebate Amount 1 FM Rebate Amount August A11.110.0083£922.22£28,588.89 B16.660.0081£1350.00£41,850.00 C10.000.0083£830.00£25,730.00 D12.220.0082£1002.22£31,068.89

11. 11 Proposed Timeframes  Proposal discussed Workstream06/08/09  Mod Panel 06/08/09  Issued for Consultation07/08/09  Closeout for Representations26/08/09  Mod Panel Recommendation03/09/09  FMR submitted to Ofgem04/09/09  Proposed Implementation date01/10/09