Draft Review Proposal 175 Encouraging Participation in the elective DM Regime Phil Broom 25 October 2007

2 Background UNC Modification 088 (Total) Scope for all I&C customers to participate (>2,500 therms) AMR based daily forecasting and settlement regime Create a new category of site, Hybrid DM(AMR) Modification rejected because: Insufficient information relating mainly to: Meter Read frequency not based on the true capability of AMR Shipper obligations too light Uncertain take-up relative to cost

3 Potential Solution? – Tweak the current regime Ofgem conclusions from UNC 088 “No conclusive information has been provided with regard to the savings customers could make as a result of being a DM(AMR) site in comparison to being a DM site. In addition analysis has not been undertaken to understand the extent to which the costs and the perceived complexity of becoming an elective DM site can and do create a barrier to customers electing to be Daily Read. Furthermore, there has been no analysis of whether there are alternative ways of addressing the complexity and cost of the DM regime”.

4 Industry Review Proposal 175 – Encouraging participation in the elective DM regime” Gaz de France ESS Encourage wide industry participation via initial review group rather than a firm proposal Objective is to deliver a cost effective and workable regime Deliver benefits for customers Cost savings for multi-site and single site Daily/Real-time information provision to enhance awareness and enable energy efficiency Offer new and enhanced products and services Enable more accurate billing from suppliers Reduce reconciliation risk for shippers Tie in daily forecast and settlement regime Shippers have commercial incentive to forecast accurately and eliminate forecast error

5 Commercial incentives for shippers Reduce reconciliation risk for shippers Transporter demand forecast error consistent 3% average Risk is forward contract price v’s System Average Price Risk can be eliminated by a joined up DM regime

6 Barriers to Participation Cost of Being Daily Metered £800 pa Technical Barrier – aged meters with no pulsed output 50-60% of portfolio Penalty charges – Capacity related ratchet charges Onerous operational process and obligations NDM Band Meter count (total) Elective DM % Elective DM Bands , % Bands ,8701, % Total 436,874 1,3430.3%

7 Efficient change Changes should be economic for suppliers and customers and should be achieved through Best use of existing systems and processes Using reliable technology that meets supplier and customer expectations Enabling suppliers to act as their own (or sub-contract) Daily Metered provider Ensure obligations and commercial incentives are appropriately placed and weighted

8 Jigsaw What are Berr/Ofgem policy objectives? What is the timetable for reform? How does our proposed approach fit with Berr/Ofgem policy objectives? Policy Objective Customer Requirement Commercial Drivers Technical Solution Industry solution must encompass

9 Proposed Workplan (Meetings 1-3) Meeting 1 – Establish terms of reference for the group Understand background to the proposal Meeting 2 – Identify potential models for change Assess relative benefits (pro’s and cons) Meeting 3 – Agree best model for development Development plan

10 Questions and contact details Any Questions? or