1. What happens when it gets cold? Planning for the winter Chris Murray GIE Annual Conference 2005 Athens, 3 November 2005

2. Presentation structure  Why is winter planning important?  Principal factors affecting winter planning and the GB experience  Liberalisation  Demand variability  Interconnectivity  Where are we now?  Conclusions

3. Why is winter planning important?  As a TSO, National Grid has two key responsibilities:  provision of adequate and reliable capacity  residual balancing  Overall responsibility for ensuring gas is delivered in a safe manner  Need to understand the short and long term supply and demand positions  Short term picture informs winter operational plans

4. What principal factors affect winter planning?  Process of planning for the winter is not static, and will depend on many factors  Liberalisation has the largest impact on process, further complexity arises from increasing demand response and interconnectivity Integrated Companies Large incumbents Limited trading Liberalised markets Multiple suppliers Significant trading Roles and responsibilities become fragmented Pre- liberalisation

5. GB Winter Planning Pre-privatisation  One company supplied all customers  Set own SOS standards  Network built to these standards  Gas contracted on long-term basis  Demand developed as considered appropriate  No gas for power generation  All indigenous natural gas Planning for the winter almost inherent - everything controlled by one player “From drill bit to burner tip”

6. GB Winter Planning: Come 1996  Network Code introduced  Business separation  Growth in TPA contracts and customer switching  TSO and market roles clarified  Growing use of gas for power  Increasing demand variability  No interconnections or LNG importation Planning for the winter still relatively uncomplicated - limited trading, dominant supplier and long-term contracts prevail

7. GB Winter Planning: Today  Over 35 active gas shippers  High levels of trading  High levels of power generation  Increased demand response  Growing number of interconnections  First of several potential LNG terminals Highly complex process relying on good quality information from a multitude of players

8. GB Winter Planning: Demand variability Increasingly difficult to forecast demand ~+16% ~-6%

9. GB Winter Planning: Changing supply pattern (up to 2014/15) Increasingly difficult to forecast supply Demand: increasing from 100 to 120 bcm UKCS: decreasing from 80 to 25 bcm Imports required: increasing from 20 to 95 bcm Potential import capacity: > 130 bcm

10. Where are we now?  Our role in planning the network is relatively unchanged  The location and availability of molecules is less certain  The process is now about collecting, assimilating and providing data  Scenarios allow market and policy makers to draw conclusions and take actions

11. Conclusion  As markets liberalise the TSO’s role in planning for the winter changes  Demand & supply are no longer predictable, but increasingly determined by market forces  Fundamental issue is obtaining, assimilating and publishing accurate and timely data, which the market, policy makers and TSO can act upon  Information is nolonger a national or even a European issue, but for most contains a global dimension