Mod 116B Steve Rose - on behalf of RWE Trading

2 Background Mod 116 B was raised after discussion with a number of shippers about aspects Mod 116 which were unduly complex and which increased shipper risk. If Ofgem decide Mod 116 does better facilitate the achievement of the relevant objectives they can then consider if Mod 116B does so more strongly. If Ofgem decided that Mod 116 does not better facilitate the achievement of the relevant objectives then neither should Mod 116B. Support or qualified support of Mod 116B does not stop Users from supporting Mods 116 and/or Mod 116C.

3 Section 1 A User may not offtake gas at a rate of offtake which exceeds or is less than the OPN Prevailing Offtake Rate by more than the relevant tolerance specified in Network Exit Provisions NExA tolerance = 3%. DN tolerance = 10% at an individual offtake and 3% at all offtakes in an LDZ 1.5% overall tolerance not sufficient to take account of a Users NExA flow entitlement and Users could incur an overrun by complying with their NExA as shown in this example.

4 Section 2 New Firm Supply Points commissioned prior to the Enduring Arrangements to have an Initial Prevailing NTS Exit (Flat) Capacity holding based on their first registered capacity. Calrification on latest date for reducing Initial Prevailing NTS Exit (Flat) Capacity. Distinction made between release/reduction of Prevailing NTS Exit (Flat) Capacity at new and existing exit points. –Developers (Users and non UNC parties) shall use reasonable endeavours to make a user commitment in the July window. –NG shall use reasonable endeavours to make new capacity available within the desired timescales if user commitment given outside July window. – NG shall use reasonable endeavours to make new capacity available from a date other than the start of the Gas Year provided user commitment is given.

5 Section If a User does not rely on the annual auctions to secure NTS Exit (Flexibility) Capacity and re-submission of its OPN reduces the amount of capacity required (based on its original OPN) the allocated capacity should be reduced accordingly. Latest time for NTS Exit (Flexibility) Capacity between Exit Zones to be aligned with initial OPN submission time. Transfer and assignment of NTS Exit Capacity (Flat and Flex) to be a matched process prior to acceptance to avoid erros being automatically accepted (as per Entry and NBP). No changes to sections 5 & 6

6 Section 7 Reference to NTS Exit (Flexibility) Commodity Charge deleted 1.5% tolerance increased to 3% in overrun calculation NTS Exit (Flexibility) Overruns only to be incurred if there is an aggregate overrun and the day has been declared a “flexible constraint day” Relief from overrun charges arising from intertrips or forced outages in the same way as for NTS Exit Capacity constraints management actions taken by NG. NTS Exit Capacity neutrality arrangements to be split into separate pots for flat and flex costs/revenues. Flat neutrality to be smeared based on proportion of national flat capacity. Flex neutrality to be smeared based on proportion of area flex capacity.

7 Sections No changes to Section 8 NG to be required to publish the following information once the enduring arrangements take effect: –Actual utilisation of NTS Exit (Flexibility) Capacity in each zone for each gas day (by 11:00 hrs D+1) –NTS Exit (Flexibility) Overrun quantity and charges for each gas day in e NTS Exit Zone NG to be required to publish the following information w.e.f. 1/7/07: –The sum of the NTS Exit (Flexibility) Capacity expected to be utilised in each zone based on the initial OPN submissions D-1 and subsequently fore each hour within the gas day

8 Advantages Potential to lessen the extent of User system build by lessening Users exposure to overrun charges and flex commodity charges. Avoids the rigidity of developers having to signal new capacity requirements within an annual July window and for an October start. Soft landing approach to such fundamental reform Avoids overrun exposure caused by intertrips/forced outages Targets flex neutrality cost/revenue only to User’s who utilise flex (as opposed to flat capacity) and only at zones where they offtake gas. Provides information on flex utilisation in advance of the first opportunity Users have to acquire it to better inform their bidding strategy.