Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. Exit Capacity Release: User Commitment Transmission Workgroup 01 September 2011

2 Background  The Exit Capacity release methodology statement was approved by Ofgem on 27 th May  Prior to submitting proposals NGG consulted on the principles of the User Commitment after an issue came to light at the time of the 2010 application window (see next slide).  In their approval letter Ofgem suggested that, because of the extent of any change that might be pursued, NGG consult on the issue well in advance of the 2012 annual review.  Notwithstanding responses to the consultation, NGG would like to check the appetite for further action at this time.

3 Issue  The principles of the User Commitment are fundamental to the release of exit capacity and are, subject to some specific exceptions, that the User:  pays, by way of exit capacity charges, an amount equivalent to four years indicative exit capacity charges. The indicative charge is based on the indicative price determined at the time of application; and  gives a minimum of 14 months notice of a reduction in its capacity allocation.  If a User decides it no longer wants exit capacity, it is restricted as to when it can effect a reduction. This limitation has given rise to an extreme case for Moffat Shippers (and could arise at any exit point with a low indicative NTS Exit Capacity price). DateActionIndicative Price p/pdkWh/day User Commitment Daily Charge Time taken to satisfy User Commitment amount. Minimum exposure July 2009 Application Window Capacity increase (effective Oct 2012) of 1 GWh/day. (Increases obligated level) *10^6 * * 365 * 4 / 100 = £1460 £14 years£1460 July 2010Indicative prices revised. Higher obligated level triggers price increase £1460£1544 years / 154 = 10 days £56210 July 2011Reduction request Rejected: User Commitment not satisfied. July 2012Reduction request.Actual price*: not yet known. Accepted** with effective date 1 st October 2013, i.e. 14 months notice. unknown * The actual price may differ significantly from the latest indicative value if the current pricing review (mod 356[A]) is implemented. ** Assuming no significant reduction from latest indicative to actual price.

4 Discussion / Initial Thoughts  Should the 14 month rule be amended? e.g. a)relax for defined circumstance where actual price >> indicative price, or b)removed entirely, i.e. reduce to 2 months for all circumstances.  There were four responses to the ExCR consultation.  One favoured the “defined circumstances” option.  Three opposed changes, at least until conclusion of mod 356 and the effects of enduring exit period are better understood.  Charging review proposals may, if implemented, minimise the impact at Moffat and could reduce the risk of recurrence.  As the issue relates to rules within UNC, the option (b above) exists for any concerned party to raise a UNC modification proposal.  Views?