Review Group 221: 23 January Analysis of the impacts of the proposal on Users

2 Analysis of the impacts of the proposal on Users New analysis tool  Tool developed to analyse RG221 Proposals Utilises all Auction Bid Values – AMSEC & QSEC Data is provided by ASEP and User Apology  Error (double counting) identified with previous Auction Bid Values presented at 10 December RG221 meeting £1.9bn total QSEC auction bid value figure less at £1.3bn Figures for other options have also been impacted (but to a lesser degree) See graph for full details Split by Baseline and Incremental capacity to be confirmed

3 Analysis of the impacts of the proposal on Users

4 Credit Rating - 50% to be applied to this risk element  Element X (25%) – applied to all Users  Element Y (25% * Credit rating risk (See table)) Standard and Poor’sMoody’s Investors ServiceIndependent Assessment Score Users Credit Rating Risk AAA/AAAaa/Aa0 AA60 BBB+Baa11080 BBBBaa2981 BBB-Baa3882 BB+Ba1783 BBBa2684 BB-Ba No credit rating 0100

5 Analysis of the impacts of the proposal on Users Credit Rating - 50% to be applied to this risk element (25% minimum)  Observations User Credit Rating (IGR) – not available in all cases Parent Credit Rating is available (where a PCG is currently used as security) Large number of Users where no credit rating is available/recorded (27 Users) Credit Rating obtained DescriptionNumber (IGR)Number (PCG) Aaa Highest quality – smallest degree of risk 01 Aa1, Aa2. Aa3 High Quality – very low degree of risk 25 A1, A2, A3 Medium Grade – low credit risk 85 Baa1, Baa2, Baa3 Medium Grade - Moderate credit risk 22

6 Analysis of the impacts of the proposal on Users Project risk - 25% to be applied to this risk element  Only 3 Users have an entry capacity holding and have projects that are currently under construction 1 User has been allocated the full 25% 1 User has been allocated 20% (feasibility study in place) 1 User has been allocated 20% but the affect is reduced when aggregated to an all ASEPs level (has capacity at more than 1 ASEP) All (49) Users are unaffected by this risk element

7 Analysis of the impacts of the proposal on Users Community Impact Risk - 25% to be applied to this risk element  The risk to the community can be measured by the proportion of the revised auction bid value against the existing User holding  Difficulties experienced on how to implement/test Test assumption: last years auction data used to derive a revised auction bid value  Impact  Suggest percentage for this risk element (currently 25%) be reduced to 10% and all figures updated at next years auction Percentage applied (range) 0%0-10%0-20%20-25% Number of Users TwentyFifteenFiveTwelve Percentage38%29%10%23%

Review Group 221: Assessment of Implementation Risks

9 Assessment of implementation risks Risk1: Users may decide not to provide the security required and project fails  2 single ASEP Users Barrow Fleetwood  £190m combined Auction Bid Value  High risk but this risk exists today  No security currently required

10 Assessment of implementation risks Risk2: Users may decide not to provide the security required and repurchasing some of the cancelled capacity at a later date.  Risk could apply to 8 Users at St Fergus that have capacity holding at this entrypoint but have little holding at other terminals.  2009 St Fergus auction price higher than historical prices