21 May 2015 GAZ DE FRANCE ESS Mod 115 An alternative view Phil Broom Gaz de France ESS

GAZ DE FRANCE ESS 21 May 2015 Measurement Issues and incentives in the monthly read sector Potential Measurement Issue Applicable to monthly read sector Incentives LDZ Off-take Metering No LSPs are reconciled on actual throughput, residual energy is correctly allocated to SSPs. RG 126 to resolve issue System Leakage No Leakage costs are borne by all Users. New shrinkage arrangements in place for DNs under 07/08 price control. Incentive for DNs to reduce leakage End User TheftNo Minimal evidence of theft in I&C market, shippers have incentive to detect and claim back costs. Unregistered Sites No No evidence of unregistered sites in I&C market. Business customers, more than others, want to be billed accurately. Transporter records error Supply Point Metering No Frequency and volume in I&C market leads to early detection and resolution. Businesses keen to manage energy budget Supplier Inputs e.g. AQ Review process No Strong incentives on monthly read suppliers to submit good data and deem accurately. Risk averse behaviour key for I&C contracts. Mod 640 has increased incentive have accurate Aqs and lower unreconciled energy. Deeming Algorithms No Monthly read meters have exceptional read performance and 4 month must read process

GAZ DE FRANCE ESS 21 May 2015 Monthly Read Performance – Shipper A Annual Average 98 % Must Reads 3-4 per month

GAZ DE FRANCE ESS 21 May 2015 Monthly Read Performance – Shipper B

GAZ DE FRANCE ESS 21 May 2015 Monthly read read performance shipper C

GAZ DE FRANCE ESS 21 May 2015 Must Read Performance – Shipper C

GAZ DE FRANCE ESS 21 May 2015 Must Read Performance – Shipper C

GAZ DE FRANCE ESS 21 May 2015 Pricing Options Transportation rates should reflect actual rates to align with objectives of transporter’s charging methodology “Compliance with the charging methodology results in charges which reflect the costs incurred by the licensee in it’s transportation business” “..properly takes account of developments in the transportation business” “facilitates effective competition between gas shippers and suppliers” Simple and efficient to administer for non-monthly portfolio – only 2 rates apply (<73,200 and 73,200 to 732,000) Should not be a penalty rate as per mod 640 – suppliers do not have control over many cost factors for unreconciled energy

GAZ DE FRANCE ESS 21 May 2015 Conclusions – basis of an alternative to mod115 Monthly read sites create immaterial contribution to unreconciled energy costs as demonstrated by increased visibility and control Monthly read meters should be excluded from unreconciled energy smear charges Transportation rate should reflect actual rates to be consistent with transporter’s charging methodology Implementation timescales should allow time for building into forward customer contracts i.e. no earlier than October 07