Review of System Alerts Transmission Workgroup 24th August 2011

Agenda Background Analysis of Prevailing GBA arrangements Overview D-1 GBA issues Within Day GBA issues GBA review scope General issues within scope for review D-1 and Within day GBA specific issues within scope for review Next Steps SOS Review aimed at exploring potential refinements or revisions to Gas Deficit Emergency Arrangements. Industry recommendations coincides with our own decision to review GBA.

Background GBA has been in place for 5 years The GBA sought to provide a signal to the Industry that a significant end of day NTS system imbalance is forecast. GBA principally implemented to provide the industry with a signal for demand side response, where a significant gas flow deficit was forecasted either day ahead or within day. Recent user feedback indicates that some aspects of the GBA signal may no longer be as effective as when initially introduced. Timely review fits with SCR focus on Gas Deficit Emergency arrangements. Intent of review is to focus is on preventative measures, alerting the market to respond. SOS Review aimed at exploring potential refinements or revisions to Gas Deficit Emergency Arrangements. Industry recommendations coincides with our own decision to review GBA.

Analysis of Prevailing Gas Balancing Alert arrangements Transmission Workgroup 24th August 2011

What Is a Gas Balancing Alert (GBA) National Grid have a UNC obligation (V 5.9) to alert system users to a EOD supply/demand imbalance via a Gas Balancing Alert (GBA) A GBA has two triggers, day ahead (no discretion) or within day (discretion) Or Expectation on the market to respond by increasing supply or initiating a demand side reduction.

Day Ahead GBA UNC reference UNC reference section V5.9.3 ‘National Grid NTS shall issue (by means of publication on its website) an alert (a “Gas Balancing Alert”) where, after forecasting demand for a Gas Flow Day in accordance with Section H 5.2.3 and Section H5.2.4 on the Preceding Day, the Forecast Total System Demand for the Gas Flow Day in question is greater than or equal to the Forecast Total System Supply for such Gas Flow Day.’ National Grid has no discretion in issuing the day ahead GBA.

Within day GBA UNC reference UNC reference section V5.9.4: ‘National Grid NTS may issue (by means of publication on its website) a Gas Balancing Alert where during a Gas Flow Day, an incident is notified to National Grid NTS that would (in the reasonable opinion of National Grid NTS) reduce the Forecast Total System Supply for that Gas Flow Day by at least twenty five (25) MCM per Day and the remaining Forecast Total System Supply for that Gas Flow Day is less than or equal to the Forecast Total System Demand.’ National Grid has discretion in determining whether to issue the within day GBA.

GBA Information Provision Each day the Gas National Control Centre (GNCC) calculates a day ahead GBA trigger level. Upon completion of this process the day ahead GBA trigger level and alert status will be published on the National Grid website. Day ahead GBA trigger level http://marketinformation.natgrid.co.uk/gas/frmPrevalingView.aspx If a GBA is declared the Alert will display as “ALERT”. If a GBA is not declared the alert will display as “NONE”. A GBA report is published daily which gives a 5 day view of supply and demand relative to the GBA trigger level, along with information relating to the Safety Monitor position. Daily GBA and Storage Monitor Position Report http://www.nationalgrid.com/uk/Gas/Data/GBA/

Day Ahead GBA Trigger Level The GBA trigger level is National Grids view of total system supply for the winter period which is calculated and applied day ahead. This conservative view of supply is made up of two aggregated supply components. 1. Non Storage Supplies (NSS) A view of likely NSS supplies are produced by National Grid in advance of the winter period and are published externally in the Winter Outlook document. NSS supplies are assessed monthly throughout the winter period as actual supply data is recorded. Any significant deviations away from the prevailing NSS assumption can reduce or increase the NSS value, leading to changes in the GBA trigger level. 2. Storage Supplies Any storage facility with two or more days deliverability, at assumed maximum rates, will be included in the GBA day ahead trigger level. Storage sites without GBA qualifying deliverability will not be included in the GBA trigger level, and the trigger level will be reduced by the maximum deliverability for those sites. National Grids methodology for calculating a view of total system supply (the GBA Trigger Level) was communicated at the October 2010 Operations Forum. We believe this process is both Transparent & Predictable

Issues with the D-1 GBA Trigger Level Methodology The UNC definition for the day ahead GBA process implies that National Grid is forecasting total system supplies for the coming gas. The current methodology is a view of total system supplies for the winter period, which is reviewed monthly. Supply patterns are too volatile to accurately forecast day ahead. Issuing a Gas Balancing Alert is no longer appropriate using the current methodology

D-1 GBA – Supply Over delivery

Issues with Current D-1 GBA Trigger Level Methodology Questions for Debate Is there still value in sending a day ahead message using the current GBA Trigger Level methodology? Should National Grid have discretion day ahead? 3. What should we call it? 4. Should we change the methodology for the trigger level? more frequent reviews? Treat LNG like storage? (supply based on deliverability) 5. Is a market response required?

Within Day GBA The within Day GBA is triggered by an incident that will reduce supplies by 25mcm/d for the remainder of the gas day leading to an EOD supply demand imbalance National Grid has discretion on within day GBA’s Expectation on the market to balance EOD position (supply/Demand side response to GBA)

Within Day GBA issues No ability to withdraw a GBA (within day supply recovery) Current process targets an EOD response only No ability to signal a within day issue (physical linepack issue) potential GDE Currently constrained to a within day alert

Transmission Workgroup 24th August 2011 GBA Review Scope Transmission Workgroup 24th August 2011

General Issues within scope for review National Grid perceived areas for review: Refining prevailing UNC GBA provisions; Renaming and splitting of the reference ‘GBA’ to separately defined within day and day ahead signals; Aligning UNC with the calculation methodology undertaken by National Grid NTS during the GBA; Introducing the ability for National Grid NTS to recall a GBA notice. Improve understanding and monitoring of how National Grid NTS and the market responds to a GBA; National Grid NTS – consider what information would help the market to initiate timely response; Industry information – consider what information would aid system operation in times of high system stress. Any industry concerns in addition to the issues described?

D-1 and Within Day GBA specific issues within scope for review Issues to be addressed in respect of specific GBA type : Day Ahead GBA; aligning UNC with the calculation methodology undertaken by National Grid NTS during the GBA; ability for National Grid NTS to recall a GBA notice. Within Day GBA; ability for NGG to signal a within day issue; Any industry concerns in addition to the issues described?

Next Steps… Discuss with Demand-side parties (via DSWG) Further develop ideas Present draft strawman proposal(s) to the industry Raise Modification Proposal