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. Planning and Advanced Reservation of Capacity Agreement – TX workgroup Update 7 th February 2013

2 Purpose  Provide regular updates to Transmission workgroup on progress of cap/conn  Including high level overview of key discussion points  Detail on next steps and plan to progress

3 Refresher 1 NG NTS cap/con objectives include:  Develop an industry wide consensus of approach to modify the regime considering the impacts of the Planning Act (2008)  Work together with our customers to ensure we meet their requirements  Flexible lead times to adapt to specific projects  Some projects may require a DCO for both NG and the customer  Some projects may require a DCO for just the customer  Some projects may not require a DCO at all etc.  Define a transparent capacity and connection process that provides greater certainty and flexibility to our customers

4 Refresher 2 Key aspects of the PARCA contract include:  Developers and/or Users are able to reserve Quarterly NTS Entry and/or Enduring NTS Exit (Flat) Capacity through a PARCA  Underpins work required to investigate build / no build options to provide the required capacity  Phased User Commitment up to point of capacity allocation  PARCA stages provide natural break points  Reserved unsold returns to market where PARCA terminated  PARCA signatory funds revenue allowance to cover spend / committed spend where PARCA terminated  Capacity financially committed to upon allocation to the User associated to the PARCA  Allocation subject to terms and conditions of the PARCA (e.g. relevant demo info provided)

5 Refresher 3 Potential changes to existing Entry Capacity release mechanisms include:  March QSEC  Incremental release not guaranteed  Demand for incremental may be met through substitution, existing capability or through non-obligated release  Ad-hoc QSEC  No longer for new ASEPs  National Grid NTS invite Users to book unsold capacity that may otherwise be reserved through a PARCA  The need for such a process is currently under discussion  workgroup sentiment is that this may not be needed

6 Refresher 4 Potential changes to existing Exit Capacity release mechanisms include:  Enduring applications  Incremental release not guaranteed  Demand for incremental may be met through substitution, existing capability or through non-obligated release  Additional ad-hoc process  National Grid NTS invite Users to book unsold capacity that may otherwise be reserved through a PARCA  The need for such a process is under discussion  Workgroup sentiment that this is not needed

7 What did we cover in the last cap/conn workgroup?  Updated on outstanding workgroup NG actions  PARCA Funding arrangements  Options we have considered and proposed way forward including:  Financial commitment  Revenue driver approach  PARCA scenarios  Focussed on interactive projects and “what if” scenarios around this  Outstanding PARCA issues update and clarification – focus on this today  Material is available on our dedicated webpage:

8 Update on outstanding issues  We proposed a potential way forward at the workgroup on the current outstanding issues  Aim to develop business rules and the UNC modification based on the workgroup feedback  Our ambition is to formally raise the PARCA UNC modification (for subsequent workgroup development) by April 2013  We need to consider system impacts (if any) e.g. is existing functionality fit for purpose.  The following slide details a potential forward on the outstanding issues

9 Outstanding Issues: Fine tuning of Capacity within the PARCA  Fine tuning of capacity should be permitted  The fine tuning range is provided by the PARCA signatory  Demo info will be required to detail the customers project design margins/uncertainty and provide rationale for them  Through stage 1a of the PARCA, NGG inform the PARCA signatory of whether the requested range can be accommodated.  In the unlikely event it can not be accommodated, NG provide a revised range at the earliest opportunity within stage 1a.  The PARCA signatory can review and adjust their initial capacity requirement within the permitted range  subject to demonstration information being provided

10 Outstanding Issues: Fine tuning of Capacity within the PARCA (2)  National Grid NTS have opportunity, through the PARCA lifecycle, to revise the permitted range and communicate why the revision is required.  e.g supply/demand assumptions could change etc  may provide additional or reduced scope for further refinement  Workgroup sentiment was that fine tuning should be permitted throughout the PARCA lifecycle  if further unsold capacity needs to be reserved this can occur up to the point of Capacity allocation as long as the need is sufficiently demonstrated

11 Outstanding issues: PARCA Window and Ad-hoc PARCA processes  A PARCA window would allow Users considering a PARCA to approach NG to allow multiple PARCAs to be considered together  e.g. interactive  Workgroup sentiment is that the PARCA window is not required.  National Grid NTS should be aware of imminent projects that could be interactive and hence can manage this accordingly  National Grid NTS will publish pertinent information to industry to inform views  This encourages potential projects to engage with National Grid NTS at the earliest opportunity.  PARCA triggered Ad-hoc Exit process - not required.  Existing ad-hoc provisions combined with clearly defined NG publishing obligations can be utilised by Users  PARCA Ad-hoc Entry process  Workgroup sentiment that this may not be needed. Users could factor the risk into their auction strategy

12 Outstanding Issues: Does the solution need to comply with EU Capacity codes? Agreed way forward:  Incremental EU rules in their infancy  Cap/Conn – seeking implementation by April 2014  ahead of currently anticipated CAM, CMP and incremental implementation timeframes  PARCA solution should be progressed to include EU IPs  EU IP arrangements may need to change upon EU code implementation

13 Outstanding Issues: What scope should there be to amend the capacity delivery date? Agreed way forward:  Applies to both National Grid NTS and the PARCA signatory  National Grid NTS commit to an indicative capacity delivery date post stage 1a  subject to the terms and conditions of the PARCA e.g. planning consent may not be granted, demo info not provided etc.  As the project progresses, there may be scope to bring the date forward e.g. acceleration of planning activities or finessing of options  Only where valued & requested  must consider the impact on other Users

14 Outstanding Issues: What scope should there be to amend the capacity delivery date? (2)  NG NTS cannot, by default, extend indicative delivery timescales unless agreed with the PARCA signatory  subject to the PARCA terms and conditions e.g. has planning consent been granted  Constraint management principles apply where National Grid NTS do not deliver to the agreed delivery date (subject to the PARCA Terms and conditions)  We believe this commitment is necessary to provide increased certainty and value to our customers  PARCA signatory agrees to the capacity delivery date and formal capacity allocation date post stage 1a of the PARCA  The impact of the failure to provide demonstration information needs further consideration  Should the capacity delivery date move where demo info is not provided on time?  Should the capacity delivery date remain static regardless?

15 Next steps  Further workgroup scheduled for 27 th of Feb  Potentially cover:  Initial thoughts on potential licence changes e.g.  lead times and incentives  revenue driver requirements etc.  PARCA contract – aim is for an initial draft of the PARCA contract to be available for discussion and review  Business rules and mod developed over the coming months