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. Cap/Con Update TX workgroup – 6 th December 2012

2 Purpose  Provide regular updates to Transmission workgroup on progress of cap/con  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  PARCA signatory funds revenue allowance to cover spend / committed spend  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

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

7 Key discussion points  User commitment – potential to introduce a reservation fee  Ad-hoc PARCA triggered QSEC / Enduring exit processes  Adds complexity to the solution - are these needed?  Establishing a stable need case  Fine tuning - when should a customer finalise their capacity requirement?  Multiple scenarios to consider  EU compliance  EU incremental in early stages of discussion  Transparency vs. confidentiality  The process needs to be transparent to both the PARCA signatory and industry, but customer confidentiality needs to be considered  Demonstration information  What happens if a date is not agreed? default date applies or dispute process introduced?  Break points / hiatus / deferment time frames  Funding

8 What changes are currently in scope? The changes we currently envisage include:  UNC  Introduction of the PARCA (in the same way ARCAs are currently referred to in UNC) and changes to the existing release mechanisms  PARCA contract  Break out points, funding, security, demonstration requirements, schedules etc  Capacity Methodology Statements  To align with UNC changes, PARCA contract principles and potential licence changes  Licence changes  Potentially as per National Grids RIIO-T1 business plan – two stage revenue drivers, lead time of 24 months, lead time incentive review / change  Revenue driver methodology  To align with licence  Determination of revenue drivers linked to the release of incremental entry and exit capacity  Charging  Potentially targeted versus socialised for stage 1 revenue driver, managing impact of revenue lag from capacity sales,  Others?  Potential changes to generic NeXAs, NEAs, Storage Connection Agreements, CSEP agreements?

9 High level view of progress needed over next 6 months  Our Aim is to have a solution that is implementable for April 2014 Dec-12 Further Review of Business Rules & Processes Draft PARCA contract framework produced and discussed Jan-13 Funding - Security / Charge and Revenue Drivers Principles Feb-13 Demonstration Info and Dates / Publication of Information finalised Contract Mechanics e.g. termination / Confidentiality / Transferability Mar-13 Development of Incentives CAP/CON Mod Drafted Draft UNC Businesses Rules agreed Draft UNC legal text produced Draft PARCA contract produced Apr-13 Formal UNC CAP/CON Mod submitted to panel for workgroup development Formal UNC Businesses Rules produced for workgroup development PARCA document developed May-13 Development of Final End to End Processes Discuss Methodology Statement changes Licence changes discussed