1. 1 Operating Margins – Request for Proposals Transmission Workstream 6 th April 2006 Dave Smith, National Grid NTS

2. 2 Operating Margins (“OM”) – Request for Proposals (RFP) Background  Existing providers  Supply side – Storage & Importation  2006/7 booking – 1648 GWh volume & 1265 GWh/d delivery  Low historical average use  Payments – Capability and utilisation fees  Establish contestability in the provision of OM  Assumes removal of prices caps for National Grid LNG Storage  Potential providers include  Demand side - Firm load, DN Offtakes  Supply side - Storage, Beach flex, Importation

3. 3 Key Requirements  Dedicated fast response (max 2 hours)  A physical flow change (additional supply or demand turndown)  When may OM be needed  Immediate period following operational stresses as a result of, for example;  a failure offshore and/or;  unanticipated demand changes and/or;  unexpected pipeline/plant unavailability  To manage the orderly rundown of the system following declaration of a Gas Supply Emergency  How long may OM be needed  Typically OM will be used to maintain NTS pressures in the period before other balancing measures become effective

4. 4 Operating Margins – Request for Proposals (RFP) Provisional Timetable  Purpose of RFP  Understand who potential providers are  Understand how potential providers will deliver service and therefore ensure the tender specification matches users requirements  We are looking for proposals from all providers (including existing providers) Invitation published28 February 2006 Deadline for receipt of proposals10 May 2006 Issue of Invitation to tender8 September 2006 Deadline for receipt of tender submissions15 December 2006 Award of contractQ3/Q4 2007 Service commencement1 st May 2008

5. 5 Operating Margins – Request for Proposals (RFP)  For further information contact: David Smith Senior Account Manager, Network Operations Tel: 01926 655534 dave.m.smith@uk.ngrid.com@uk.ngrid.com or Nicholas Gardner Senior Account Manager, Network Operations Tel: 01926 653450 nicholas.gardner@uk.ngrid.com