1. European Workgroup 1st May 2014

2. 1. General Update

3. Code Status Update Code Current Status Implementation date
Congestion Management (CMP)
Implemented
1st October 2013 (Fixed)
Capacity Allocation Mechanism (CAM)
CAM approved for EU wide implementation at relevant EU IPs.
1st November 2015 (Fixed)
Gas Balancing (BAL)
BAL approved for EU wide implementation 26th March 2014 (Commission Regulation (EU) No 312/2014 establishing a Network Code on Gas Balancing of Transmission Networks.)
1st Oct 2015 (subject to NRA approval for additional 12 months) (Fixed)
Interoperability & Data Exchange (INT)
In comitology. Comitology meetings postponed from 28th April and 11th July 2014, new dates TBC.
Q (Estimated)
Tariffs
Under development. Code to be submitted 31st December 2014.
Estimated earliest mid January Applicable from October 2017.
Incremental Capacity
Under development. Incremental Capacity to be introduced via combination of new articles in CAM Network Code and via Tariffs Network Code. Code amendment to be submitted 31st December 2014.
Applicable from March 2017

4. Gas Codes Timeline

5. Road Map Notes: 1) Short term UIOLI may not be required for NTS
2) Long term capacity auctions may need to be delivered in conjunction with short term auctions

6. 2. EU Code Updates

7. Gas allocations at IPs under the EU Interoperability Code

8. Background – the current GB allocations regime
The GB commercial regime has always kept ‘transportation’ and ‘energy’ responsibilities separate
Shippers are allocated gas according to measured quantities
Shippers use allocation agents to administer allocations on their behalf based on measured quantities - and to send allocation statements to NG 8

9. Background – Interoperability Code provisions and stakeholder views
TSOs must agree a nomination matching rule/process and for this to be included in the Interconnection Agreement (IA)
‘allocate as nominate with Operational Balancing Account (OBA)’ allocation rule envisaged, and for the allocation rule to be included in the IA*
OBA favoured by IUK, BBL and supported by Gaslink – NG working with adjacent TSOs to facilitate OBAs (retaining NG’s residual balancing role)
*for any IP, an OBA will be used if at least 1 TSO wants this arrangement. 9

10. Operational Balancing Account
What is an OBA?
Nominates 4 Units
Operational Balancing Account
= (4 – 4.01) = 0.01
4.01 Units steered
Across the IP
Shipper
TSO
Allocates 4 Units
GB current regime: 4.01 units would be allocated to shippers and scheduling charges apply for the 0.01 ‘steering error’
OBA regime: 0.01 is allocated to the OBA which is corrected by a subsequent physical steer of flow between TSOs

11. OBA key issues and implications
Size of steering tolerance
Interactions with other aspects of the GB regime
Steering tolerance breaches must be minimised in order to comply with the Interoperability Code
An option in relation to breaches in steering tolerance is reversion to allocate as measured 11

12. National Grid NTS’ proposed approach (1)
An allocate as nominate regime appears to remove the need for an agent to administer allocations on shippers’ behalf
…therefore, NG’s proposed approach is to perform matching / allocation process directly with adjacent TSO, as envisaged by the Code (No Agents)
Shippers could continue to be able to nominate agents for other communications under UNC TPD V 12

13. National Grid NTS’ proposed approach (2)
‘De-designate’ IP allocation agents in order to enable direct TSO-TSO arrangements under ‘allocate as nominate with OBA’
National Grid NTS to liaise with Ofgem before issuing Notice to Users of intent to de-designate, with briefing note - via Joint Office
National Grid NTS to ensure Notice period is sufficient (issued by Sept 2014) to enable changes by Users and Agents to their own agreements 13

14. Indicative timeline Task Timeline
Negotiate terms with adjacent TSOs to facilitate OBAs
Qtr 2 – Qtr
EU Workgroup discussions
May – June 2014
UNC Mod raised
Qtr
UNC Mod development
Qtr – early Qtr (subject to revised comitology dates)
Liaison with Ofgem re IP allocation agents
Notification of de-designation of allocation agents and briefing note sent to Users via Joint Office 14

15. Summary and next steps
National Grid NTS considers that an OBA allocation regime will be required at all three IPs
Changes will be required both to the Interconnection Agreements and UNC
We propose to engage in parallel with our adjacent TSOs and GB shippers to agree the OBA design
Interactions with other aspects of the GB regime will also be explored (e.g. constraint management, meter reconciliation)
Progress update to be shared at the June European Workgroup meeting 15

16. Tariff Code & Incremental Capacity Amendment

17. European Network Code Development Process
ENTSO
EU Commission
ACER (ERGEG/CEER)
ENTSO
Work
programme
Agency
Commission
Stakeholder
Consultation
Stakeholder
workshops
Framework
guidelines
Stakeholder
Consultation &
workshops
We are
here
Preparation of
draft Network
Code
Commission
Agency
Direct link from Commission to comitology: Commission can bypass ENTSOs and ACER if it wishes e.g. gas congestion management principles
Consultation
Commission
DECC
Comitology
Legally binding
Network
Code
GB Code
Change process 17

18. EU Tariff Code update
ENTSOG Stakeholder Joints Working Sessions now complete
ENTSOG now developing draft Code based on ACER FG and taking account of stakeholder feedback received during SJWS process
Code based on published Business Rules
Draft TAR NC due for approval within ENTSOG’s internal governance process by mid-May
Draft Code and supporting document published end May
Public Consultation on the draft TAR NC will take place from the end of May to the end of July
Next Stakeholder Workshop – 25th June

19. Structure of the Draft TAR NC
Recitals
General Provisions
Chapter 1
Subject matter
Scope
Definitions
Cost Allocation Methodologies
Chapter 2
Link to transmission revenue
Inputs
Entry/exit split
Selection and approval process/criteria
Cost allocation methodologies
Secondary Adjustments
Cost allocation test
Storage 19 19

20. Structure of the Draft TAR NC
Publication Requirements
Chapter 3
Aims of information publication
What to publish
How to publish
Publication of information for multiple TSOs
Tariff setting year
Publication notice period
Reserve Prices
Chapter 4
Firm standard capacity product pricing (multipliers and seasonal factors)
Interruptible capacity pricing (uni- and bi-directional interruptible capacity)
Revenue Reconciliation
Chapter 5
Aims of revenue reconciliation
Under/over revenue recovery
Regulatory account
Reconciliation of the regulatory account 20 20

21. Structure of the Draft TAR NC
CAM Related Topics
Chapter 6
VIP pricing
Bundles capacity pricing
Payable Price
Incremental and New Capacity
Chapter 7
Publication requirements
Economic test
Determination of the price
Final and Transitional Provisions
Chapter 8
Mitigating Measures
Entry into force 21 21

22. EU Tariff Code update - issues
Fixed Price vs Floating price at IPs
ACER clearly states only Floating is allowed (i.e. the price paid at time of use will not be the same as price allocated in auction)
Strong shipper feedback to retain option of allowing fixed price – especially for incremental capacity.
Initial Draft Code from ENTSOG likely to allow both Fixed & Floating
Shorthaul at IPs at risk due to loss of commodity charge at IPs
NG working with ENTSOG to preserve this product
Mitigation measures: shippers pushing for one-off reset of long-term capacity contracts when Code comes into effect (i.e. right to cancel contracts due to application of different pricing methodology)
NG has requested ENTSOG legal team to see if Tariff Code can legally include provisions to allow this option.
Standardisation of Gas Tariff Year (1 Jan vs 1 Oct)
problems for GB if 1 Jan chosen (would create price volatility)
For further information, please contact Colin Hamilton )

23. EU Incremental Amendment update
Incremental Amendment to CAM Code will deliver:
A standardised way for market participants to flag appetite for incremental /new capacity
A standardised process to ensure a minimal level of cross border TSO/NRA coordination
A standardised process to establish economic viability of an incremental/new capacity project with local input parameters
An integrated offer of incremental and existing capacity via CAM NC auction process
Principles for Open Season Procedures in case auctions cannot be used
Possibilities to adjust tariff or depreciation rate in case economic viability cannot be established in existing framework

24. EU Incremental Amendment update
Incremental Amendment being develop together with Tariff Code, thus:
ENTSOG Stakeholder Joints Working Sessions now complete
ENTSOG now developing draft Amendment based on ACER Guidance Document and taking account of stakeholder feedback received during SJWS process
Code based on published Business Rules
Draft INC Amendment due for approval within ENTSOG’s internal governance process by mid-May
Public Consultation on the draft INC amendment will take place from the end of May to the end of July
Next Stakeholder Workshop – 24th June
For further information, please contact Colin Hamilton )

25. 3. UNC Modification Plans

26. Phase 2 UNC Modifications Potential Timescales
EU Network Code
Area of change
Panel Submission
Workgroup Development
UNC Consultation
Gas Balancing (BAL)
Information Provision
March 2014
6 Months Q
SMP Buy & Sell
April 2014
Nomination Process at IP’s
6 - 9 Months Q
Capacity Allocation (CAM)
CAM / CMP Compliant Capacity Auctions Q Q
Interoperability & Data Exchange (INT)
OBAs / allocations Q
Interconnection Agreements/Contract Changes
(facilitating Modification ) Q
Data Exchange Q

27. 4. Draft Modifications

28. CAM & Bacton Modifications

29. Initial Estimated Timescales CAM & Bacton UNC Modifications
raised at UNC
Panel
Finalise WG
Report and
UNC Panel
Vote on
Modification WG
submit to
development
Modification
Panel
FMR and WG
submission
Development
to Ofgem
Draft CAM Mod
shared with
EU WG
UNC Panel
to review
Modification
Modification
Modification
WG report WG WG WG
and issue to
Development
consultation
15 May
development
development
18 DEC
3 Jul
4 Sep
6 NOV EU
Workgroup
1 May
20 NOV
5 Jun
7 Aug
2 Oct
Consultation
May 14
Jun 14
Jul 14
Aug 14
Sep 14
Oct 14
Nov 14
Dec 14
Ofgem
Implementation
Decision
Date EU
Feb
1st Nov*
Workgroup
*W.E.F 1st November 2015
Jan 15
Feb 15
Nov 15
CAM & Bacton Modifications 29

30. CAM UNC Modification Outline
Key features of proposal:
Applicable to European Interconnection points - Bacton (IUK and BBL) and Moffat
An EU set of standard capacity products for both entry and exit (yearly, quarterly, monthly, daily and within day) and cessation of Enduring Annual NTS Exit (Flat) Capacity at IPs
An EU standard capacity auction calendar
EU standard capacity auction designs (Ascending Clock and Uniform Price)
Priority given to cross-border bundling of unsold capacity products
Set aside capacity from longer term auctions for shorter term auctions at IPs
Capacity originally allocated as cross-border bundled capacity can only be resold as bundled capacity on the secondary market

31. CAM UNC Modification Outline
A joint booking platform for the offer and purchase of capacity at interconnection points
Charging arrangements
Transitional arrangements
Adapting pre-existing CMP solutions to apply to CAM products and auction processes where appropriate.

32. Bacton UNC Modification Outline
Create new points in Gemini:
Bacton UKCS ASEP
Bacton IP ASEP
Write out to individual Shippers
Ask them to decide where they want their existing Bacton rights post split to be
Principle is to allocate only up to new obligated levels
If aggregate requirements less than obligated, allocate in full
Else second invitation – again allocate in full if below obligated level
Else need to pro-rate back to obligated level (and allocate surplus to ‘other’ point)
Reallocation process to run after March 2015 QSEC is allocated
To be completed by September 2015 32

33. Initial Draft Timeline for Bacton Reallocation Process
Existing UNC processes
RMT&TSEC and Daily auctions continue for each month
Need to suspend RMT&TSEC and Daily auction for Nov at Bacton ASEP
Mar 2015 QSEC auction held
Need to stop Capacity Transfers at Bacton once new process begins
Feb 2015 AMSEC auction held
Mar 2015 QSEC auction allocated
2015
Feb
Mar
Apr
May
Jun
Jul
Jul
Aug
Sep
Oct
Nov
New processes
Write out with final reallocations, hold second process if necessary
Write out with proposed reallocations, hold second process if necessary
10 days after QSEC auction is allocated Invite Users
CAM implemented
Inform Shippers of new ASEPs by May 2014 (if 12 months’ notice given)
Inform Shippers of any new charge types or changes to invoices
Second Capacity Reallocation if necessary
First Capacity Reallocation 33

34. CAM & Bacton UNC Modifications - Next Steps
Request referral to a Workgroup for development
Solution detail to be developed as part of workgroup
Legal text will be developed and provided during the development process
Better facilitates objective (g) compliance with EC Regulation
Any questions? 34