1. Modification 501 slides for Workgroup
Lesley Ramsey
Matthew Hatch

2. Background
Currently, commercial arrangements for gas flows at Bacton ASEP, (both interconnectors and off shore production) are covered by the provisions of the UNC.
EU Codes introduce rules to apply to IPs
To ensure CAM/CMP procedures are only applied at Interconnection Points (IPs), the existing BACTON ASEP will need to be split into two new ASEPS
Bacton UKCS ASEP
Bacton IP ASEP
Existing UNC processes would continue to apply at the new Bacton UKCS ASEP
CAM/CMP process will apply at Bacton IP ASEP 2 2

3. EU Regulation -requires changes to capacity arrangements
Continues to be covered by
GB UNC
FIELD
Production
FIELD
Production
Bacton
UKCS
Terminal
Sub Terminals
FIELD
Production
FIELD
Production
BBL ST
IUK ST
To be covered by
EU Regulation

4. Requirement to split existing holdings between the two new ASEPs
[June 2015]
NGG issue Invitation Letter
Shippers indicate
where existing
Bacton holdings
are required
Further invitation letter
to again indicate where
existing holdings required
Are aggregate level below
obligated levels
Requests are aggregated
and compared
to obligated levels
Are aggregate level below
obligated levels NO
YES NO
YES
Requests pro rated
Requests allocated in accordance with Shipper requests 4 4

5. Main principle
Following the reallocation of existing capacity between the 2 Bacton ASEPs Users will :
hold the same amount of NTS Entry Capacity in aggregate (at the two new Bacton ASEPs) as they currently hold at the existing Bacton ASEP
be liable for the same costs at the 2 new Bacton ASEPs as they currently are at the existing Bacton ASEP (under the current charging methodology) 5 5

6. Proposed timeline for the Bacton Reallocation process
Existing UNC processes
RMT&TSEC and Daily auctions continue for each month
Once Bacton Reallocation process is complete, re-instate relevant UNC processes
Mar 2015 QSEC auction held
Need to suspend RMT&TSEC and Daily auction for Nov at Bacton ASEP
Need to stop Capacity Transfers at Bacton once new process begins
Mar 2015 QSEC auction allocated
Feb 2015 AMSEC auction held
2015
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
New processes
Write out with reallocations (where determined) hold second process if necessary
Write out with reallocations from final process if necessary
10 days after QSEC auction is allocated Invite Users
CAM implemented
Inform Users of new ASEPs following Ofgem direction of GT Licence changes
Inform Users of any new charge types or changes to invoices
Final Capacity Reallocation if necessary
First Capacity Reallocation 6

7. Obligated levels at Bacton Entry Point
Obligated level of capacity at the existing Bacton ASEP (Table 6 of Special Condition 5F of GT Licence) is :
GWh/d
The creation of 2 new points and obligated levels will require Ofgem to issue a Section 23 notice. The October 2013 Ofgem Open letter suggested the following:
Bacton UKCS GWh/d and
Bacton IP GWh/d
The final values in the GT licence could be different, but the Ofgem Open letter values have been used in the following examples 7 7 7 7

8. UNC processes to be suspended
From [June – October 2015], whilst the reallocation process is taking place, the following processes will be suspended
Transfers of NTS Entry Capacity (TPD B5) for the period 01 November 2015 onwards
New Capacity Constraint Management agreements (TPD B2.8) for the period 01 November 2015 onwards
There will be no October 2015 RMT&TSEC auction for November 2015 NTS Entry Capacity at Bacton ASEP
There will be no relevant daily auctions held in October 2015 for November 2015 NTS Entry Capacity 8

9. Invitation Letter
Invitation letter issued requesting that Users signal how they want their existing registered NTS capacity at Bacton to be reallocated between the two new ASEPs
Issued following Feb 2015 AMSEC and Mar 2015 QSEC
Invitation letter will contain
User’s current capacity holdings at existing Bacton ASEP
A proforma for the User to indicate quantity of capacity to be allocated at each new ASEP
NTS Entry Capacity requested at the two new ASEPs should be equal to the existing holdings held at the Bacton ASEP for each relevant period
Completed profoma to be faxed back to NGG by [26 June 2014] 9 9

10. Existing holdings
Example of Users holdings over all the QSEC auctions over the quarters 1 October 2016 until 30 September 2018 are as per the table below:
kWh/day
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
400,000,000
10,000,000
User B
200,000,000
User C
300,000,000
User D
100,000,000
TOTAL
1,000,000,000
1,300,000,000
40,000,000
30,000,000 10 10 10 10

11. Reallocation
If the Initial Capacity Reallocation fully reallocates all the existing Registered NTS Entry Capacity to the two new ASEPs then
NGG will reallocate on Users behalf as per Users request
User will not be required to undertake any actions
If Users do not respond by the required date then
the default will be reallocation between the Bacton UKCS ASEP and the Bacton IP ASEP in the same proportion as the Obligated levels at the two ASEPs. 11

12. Eg -Requests aggregated and compared to baselines
Initial Capacity Reallocation IP
kWh/day
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
200,000,000
5,000,000
User B
40,000,000
2,000,000
User C
120,000,000
160,000,000
4,000,000
User D
60,000,000
180,000,000
6,000,000
Total
420,000,000
580,000,000
17,000,000
11,000,000
UKCS
8,000,000
240,000,000
720,000,000
23,000,000
19,000,000
TOTAL
1,000,000,000
1,300,000,000
30,000,000
Above Obligated level
Obligatd level 1302Gwh
Obligatd level 481.4Gwh
For the other four quarters, the User requests will be allocated as requested as the aggregate requests are below the Obligated levels
The aggregate requested level at the UKCS ASEP are above the Obligated level of 481.4Gwh 12 12 12 12

13. Final Capacity Reallocation
Where Users have signalled an aggregate level of capacity > obligated level for any Months/Quarters to the two new ASEPs
NGG will issue on [3rd August 2015] another Bacton capacity reallocation invitation for relevant months/quarters to give Users another opportunity to indicate where they would wish their Registered NTS Entry Capacity rights to be held in future
This final capacity reallocation will take place by [14th September 2015]
The whole process is anticipated to be completed by [28th September 2015]. 13

14. Final Capacity Reallocation
Example User requests
Final Capacity Reallocation IP
kWh/day
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
200,000,000
5,000,000
240,000,000
User B
80,000,000
4,000,000
100,000,000
User C
120,000,000
160,000,000
User D
60,000,000
180,000,000
6,000,000
Total
460,000,000
620,000,000
19,000,000
520,000,000
13,000,000
UKCS
40,000,000
540,000,000
680,000,000
21,000,000
480,000,000
17,000,000
TOTAL
1,000,000,000
1,300,000,000
30,000,000
Above Obligated level
Obligatd level 1302Gwh
Obligatd level 481.4Gwh
After the Final Capacity Reallocation, there are still three quarters where the Users aggregate requested level of capacity at the UKCS ASEP is above the Obligated level (481.4Gwh), so pro-ration will take place for those quarters
The requests in the quarter beginning 1 January 2018 will now be allocated in full as they are below the two Obligated levels 14 14 14 14

15. Pro-ration Example Previous slide shows UKCS
oversubscribed, compared to new baseline of 481,400,000kwh
(for period )
User A
200,000,000
User B
120,000,000
User C
180,000,000
User D
40,000,000
Total
540,000,000
Pro-ration is applied (User Bids/ Total User Bids x Baseline = Prorated allocation)
User A
178,296,296
User B
106,977,778
User C
160,466,667
User D
35,659,259
Total
481,400,000 15

16. Pro-ration
Example User requests through Bacton Reallocation Process - Pro-ration Process
Need to pro-rate in 3 Quarters IP
kWh/day
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
221,703,704
258,411,765
5,000,000
240,000,000
User B
93,022,222
115,047,059
4,000,000
100,000,000
User C
139,533,333
230,094,118
120,000,000
User D
64,340,741
215,047,059
6,000,000
60,000,000
Total
518,600,000
818,600,000
19,000,000
520,000,000
13,000,000
UKCS
178,296,296
141,588,235
160,000,000
106,977,778
84,952,941
160,466,667
169,905,882
180,000,000
35,659,259
40,000,000
481,400,000
21,000,000
480,000,000
17,000,000
TOTAL
1,000,000,000
1,300,000,000
30,000,000
Original Bacton ASEP holding re-allocated to other point
Remember bids need to end up >= Minimum Eligible Amount of 100,000
Pro-rate as above Obligated level
User requests are pro-rated back to the Obligated level at the UKCS ASEP in the three quarters highlighted and the remaining amount of requested NTS Entry Capacity is reallocated to the IP ASEP 16 16 16 16

17. Charges
Users will be liable for the same charges (at the two new Bacton ASEPs) as they currently are at the existing Bacton ASEP under the current charging methodology
A weighted average price for the capacity for the relevant periods will be used (calculated for each User)
Note: original clearing price of relevant auction 17

18. Assumed QSEC clearing prices to calculate WAP
Consider the quarters from 1 October 2016 until end of September 2018
The following table shows example clearing prices which were set in the three different QSEC auctions:
QSEC Clearing prices
p/kWh/d
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
QSEC1
0.0008
0.0012
0.0001
QSEC2
0.0007
QSEC3
0.0010
0.0005 18 18 18

19. Assumed User holdings at Bacton ASEP
The User holdings in the three QSEC auctions over that period are shown in the table below:
Example User detailed holdings at existing Bacton ASEP
kWh/day
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
QSEC1
100,000,000
5,000,000
QSEC2
200,000,000
QSEC3
Total
400,000,000
10,000,000
User B
User C
50,000,000
150,000,000
300,000,000
User D
45,000,000
55,000,000
TOTAL
1,000,000,000
1,300,000,000
40,000,000
30,000,000 19 19 19

20. Assumed User holdings at Bacton ASEP - £s
The following table shows the charges which the Users are liable for from each of the QSEC auctions:
Example User detailed holdings at existing Bacton ASEP £s
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
QSEC1
73,600
108,000
455
460
72,000
QSEC2
128,800
126,000
3,185
3,220
QSEC3
110,400
90,000
92,000
Total
312,800
324,000
3,640
3,680
294,400
288,000
User B
2,275
2,300
184,000
198,000
2,730
2,760
165,600
162,000
User C
36,800
36,000
64,400
63,000
180,000
138,000
135,000
266,800
351,000
239,200
234,000
User D
28,980
94,500
28,350
60,720
50,600
49,500
89,700
229,500
5,460
5,520
79,580
77,850
TOTAL
853,300
1,102,500
14,560
14,720
778,780
761,850
9,100
9,200 20 20 20

21. Assumed User holdings at Bacton – User WAPs
So the individual User weighted average prices can be calculated from the original QSEC auction clearing prices for the relevant periods
And these WAPs will be used during the Bacton Reallocation process
at both the Bacton UKCS and Bacton IP ASEPs
Example User detailed holdings at existing Bacton ASEP
p/kWh/d
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
WAP
User A
0.0009
0.0004
0.0008
User B
0.0010
0.0011
0.0003
User C
User D
0.0006
0.0000 21 21 21

22. Results of the Reallocation Process £s
Original User holdings at existing Bacton ASEP £s
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A
312,800
324,000
3,640
3,680
294,400
288,000
User B
184,000
198,000
2,730
2,760
165,600
162,000
User C
266,800
351,000
239,200
234,000
User D
89,700
229,500
5,460
5,520
79,580
77,850
Total
853,300
1,102,500
14,560
14,720
778,780
761,850
9,100
9,200
Reallocated User holdings £s
01/10/2016
01/01/2017
01/04/2017
01/07/2017
01/10/2017
01/01/2018
01/04/2018
01/07/2018
User A IP
173,372
209,314
1,820
1,840
163,174
172,800
UKCS
139,428
114,686
131,226
115,200
Total
312,800
324,000
3,640
3,680
294,400
288,000
User B
85,580
113,897
1,092
1,104
77,022
81,000
98,420
84,103
1,638
1,656
88,578
184,000
198,000
2,730
2,760
165,600
162,000
User C
124,092
201,908
111,255
93,600
142,708
149,092
127,945
140,400
266,800
351,000
239,200
234,000
User D
57,714
164,511
3,276
3,312
51,202
46,710
31,986
64,989
2,184
2,208
28,378
31,140
89,700
229,500
5,460
5,520
79,580
77,850
TOTAL
853,300
1,102,500
14,560
14,720
778,780
761,850
9,100
9,200
Users are therefore liable for the same financial commitment for their NTS Entry Capacity rights at the two new ASEPs as they were at the original Bacton ASEP 22 22 22 22