1. UNC Modification Proposal 0229 Guidelines document

2. Background  Ofgem RIA states that it is ‘minded to accept’ Mod 0229  NGD presented its concerns with the associated guidelines at January 2010 Distribution Workstream  As agreed at Workstream, DNOs have since engaged with Proposer and discussed these  No agreement on issues forthcoming. 0229 guidelines remain unchanged.

3. DNO concerns  DNOs accept that 0229 principles essentially sound. However our opinion is that:  Proposal as drafted (including guidelines)  Perceived as unduly complex  Could give rise to challenges and process ‘stop points’  Possibly unlikely to result in timeline to conclusion  Unmitigated risks exist  AUGE tender controlled by UNC Committee  Not acceptable for UNC Committee to select AUGE and then for Transporters to be forced to contract with selected party.  Eventualities - Suitability of candidate/or no candidates?

4. DNO concerns (continued)  Multiple opportunities for parties to challenge/agree output of AUGE (AUGS) – undermines purpose of independent agent  Risk that challenges driven by commercial interests - undermines ‘neutrality’ of AUGE  Once appointed need to let AUGE conclude  Risk of changes to Guidelines which could impact Transporter contractual arrangements  Guidelines appear to be unclear as to the specific output i.e. the ‘methodology’ or ‘Statement’ or ‘AUGS’? Also timing and deliverability not clear.  Complexity threatens delivery within timescales – likelihood that ‘zero volumes’ could result.  Process for AUGE/AUGS output unduly protracted – no output for up to 2 years from implementation.

5. DNO opinion:  No issues with Mod 0229 principles (includes appointment of independent AUGE & production of AUGS)  Must be a simplified AUGE tendering and appointment process – wholly a Transporter responsibility (see suggested amendments)  Should addresses the scenario where AUGE is not appointed  Should permit challenge and review but process should conclude in an acceptable timescale  Reliance on AUGE as ‘independent’ authority ensures AUGS not influenced by commercial drivers/interests  Ofgem has requested legal text – NGD has commenced work  Funding arrangements appear not to be addressed  Assuming Ofgem directs to implement – need to identify and consider next steps?