1. MOD0335: Offtake Meter Errors David Watson Distribution Workstream - 28 th October 2010

2. 2 Solution must solve all cash-flow issues We agree with the Proposer that the cash-flow impacts of Offtake Meter Errors (OME) can be severe. –Recognise that some of the benefit / cost for Shippers from OMEs is reconciled back eventually through NTS Shrinkage charges. Significant issue is that NTS commodity rate change happens on a different timeline to the RbD credit / debit. Post determination: –RbD invoices changed in one go, within ~2 months. –NTS commodity rate reduction starts within ~2 months and then smeared over ~6 months. Solution needs to –Align the RbD and NTS commodity rate change timelines for part which is reconciled, and –Mitigate cash-flow issues on part which is not reconciled.

3. 3 Example of Impact on SSP Shipper (under-recovery) Offtake Meter Error RbD charge made in one go. Reduction in NTS commodity rate received over ~6mnth period. Period of cash-flow issues. Important to note that only the element of NTS Shrinkage above / below incentive collars is paid back, leaving gap in funding to be met by SSP Shippers. Solution also needed to ensure cash-flow impact of this is minimised.

4. 4 Solution 1 Solution 1: Align RbD Charge repayment with the NTS Commodity Rate reduction. Solution 1: Remedy still required for the surplus cost; reconciliation should be smeared over same period of time as the error occurred over. ***NB: In instances where the meter over-measures, the cash-flow impact is currently on NTS. In cases of under-measurement, the cash-flow impact is on Suppliers. This solution will solve both sides of the issue.

5. 5 Solution 2 Solution 2: Align NTS Commodity Rate reduction with the RbD charge; i.e. received in one go.. Solution 2: Remedy still required for the surplus cost; reconciliation should be smeared over same period of time as the error occurred over. ***NB: In instances where the meter over-measures, the cash-flow impact is currently on NTS. In cases of under-measurement, the cash-flow impact is on Suppliers. This solution will solve both sides of the issue.

6. 6 Conclusions Elements of the RbD Charge which are reconciled back through NTS commodity rate change must be repaid on the same timeline as that reconciliation. –Avoids cash-flow issues on both Shippers (offtake meter under- recovery) and NTS (offtake meter over-recovery) Elements of RbD Charge which are not to be reconciled must be repaid over the same period of time as it took to identify the error.