DN Interruption Reform Distribution Workstream 23 rd July 2009

2 Agenda  Background to DN Interruption Reform  Outcome of 2008 DN Interruption tender  DN Analysis  Proposed Approach  Next Steps

3 Background to DN Interruption Reform  Implemented 1 April 2008  DNs tender for interruption rights three years ahead of use  DNs incentivised to procure appropriate level of interruption and investment in networks  Fewer interruptibles from 2011 onwards

4 Outcome of 2008 DN Interruption Tender DN Post 2011 Interruptible Load % peak loadNo. of sites SGN<17 NGN1.055 NGG0.27 WWU0.44

5 All DNs Prelude

6 All DNs Post Mod 90

7 Approach Identify Firm Load Shedding Capability post Mod 90  Establish a target based on the performance achieved in Exercise Prelude  NEC wants speed and confidence on DN deliverability Load shed in 4 hours LDZ specific Resources available for Site visits where required  Shipper obligations remain to maintain site contact details

8 Example – NGG Analysis Prelude

9 Example – NGG Analysis post Interruption Reform

10 Next Steps DN Best Practice  Preparation Data Validation [NG top 200 per LDZ] Site Visits > 2 million therms [NG 212 across 5 LDZs] NEC involved Industry Engagement  GATG  Emergency Exercises (2009 and 2010) Highlight Target Customers Recycling Contact Information Escalating Contact Information Increased Number of Site Visits  Revised DN Safety Case submissions August 2009

11 Summary Current approach aims to improve the quality of contact information at the larger FSPs.  Contact Information will be issued to Users  Users will be expected to update the Supply Point Register where necessary Quality of information to be assessed via [NEC] exercise

12 Possible Future Changes Concern that performance may remain low:  Option for consideration of incentives for the accuracy of User provided information  It is not our intention to propose such a regime at this time Mod proposal 0728 – decision letter. Effectiveness of incentives on interruption contacts “In contrast to firm load shedding, incentives exist in the UNC for shippers to ensure this data is correct, so that interruption occurs when required. UNC penalties apply for failure to interrupt and these are usually replicated in relevant supply contracts with customers. Such incentives appear to have worked successfully to date…for sites with firm supply contracts, statistics have shown widely varying levels of shipper/supplier performance. …collecting and maintaining ECI comes at a cost, and [Ofgem] takes the view that those shipper/suppliers with poor levels of performance should not obtain an advantage over others. Ofgem therefore considers that further thought should be given to introducing greater incentives in this area”

13 Potential Scope of User Provided Contacts Scheme  Scheme aimed at testing quality of contacts provided by Users  Top 200 sites (Bands A and B) per LDZ will be validated by Transporter and are hence an inaccurate measure of User performance  Next largest 50 sites (Band C) per LDZ (650 across 13 LDZs) could be measured for the purposes of an incentive scheme LDZ 1 LDZ 2 732,000kWh Band A - Mandatory DM – Transporter Site Visits / Phone Call Band B - Remainder of top 200 per LDZ – Transporter phonecalls Band C th largest per LDZ – Subject to incentive scheme Largest LFSPs Smallest LFSPs A A B B CC

14 Potential Financial Scheme Operation: Principles Transporters would be revenue neutral within the scheme  However, they would recover costs associated with administration of the scheme Value of incentive charges would be inversely proportional to performance  High overall performance would result in comparatively low incentive charges  Low overall performance would result in comparatively high incentive charges Scheme would require  ‘Income’ – notionally paid into scheme by Users (based on market share of Band C)  ‘Expenditure’ – scheme notionally repays funds to Users (based on individual performance within Band C)  Only the net value is actually invoiced Income and expenditure levels would be determined by registered SOQ values to reflect relative importance of larger loads in Firm Load Shedding Process Performance assessed via NEC Annual Exercise