Modification Proposal 0133 – “Introduction of AMTSEC auction” Transmission Workstream, 1 Mar 07

Background Currently no flexibility for unsold capacity to be reallocated to where Users value it most once baselines set at start of price control could, in extreme, lead to capacity sterilisation National Grid NTS obliged under TPCR to take reasonable steps to provide transfer rates to Users Modification Proposal 0133 raised to seek to introduce new auction to allow unsold capacity to be purchased from other ASEPs in non-discriminatory, competitive manner To be supported by Entry Capacity Transfer Methodology Statement outlining how rates will be determined Licence obligation to maintain buy back risk

Maintaining Buy Back Risk (1) Challenge is determination of a single fixed transfer rate between recipient “sold out” ASEPs and donor “unsold out” ASEPs for publication in auction invitation Need to cater for many potential scenarios of capacity transfer where capacity transferred from and where transferred to amounts of capacity transferred

Maintaining Buy Back Risk (2) Proposal seeks to do this by….. Users providing as part of AMTSEC registration process Range of amounts desired at specified Recipient Nodes Determination of Nodal Maxima maximum amount that can be transferred to each Recipient ASEP represents physical limits in vicinity of Recipient ASEP Releasing unsold capacity from Donor ASEPs in several auction rounds for rates to be “valid”, transferred quantities must be within 90% of unsold quantities released in auction round allows new rates to be determined based on outcome of previous auction rounds

Rationale for the 90% Rule If Transfer Rate based on 100 units of transfer, but only 40 units transferred through auction, rates would be invalid

Application Fee What will payment of an Application Fee entitle the Shipper to see? Auction invitation containing all transfer rates (see 4(a) of Mod) to inform bidding strategy Also allows participation in auction At what level will the Application Fee be set? Depends on outcome of 0133 development process. Aim is to recover costs of determining Transfer Rates and holding AMTSEC auction. Consultation will be undertaken and discussed at [April] Gas TCMF

Workstream Views Does the workstream… require any further clarifications of the draft proposal? consider that there are areas that require further development? support proposal proceeding to consultation?