1. Northern Gas Networks Limited Shrinkage Forum 8 th March 2007 Shrinkage Adjustments for Gas Year 2005/06

2. LDZ Applied Shrinkage Factors 2005/06 Assessed Shrinkage Factors 2005/06 Difference North 0.603%0.5776%0.0254% North East 0.664%0.6409%0.0231% 2005/6 Shrinkage Factors

3. LDZ Average System Pressure OUGTOG North 0.5463% (0.548) 0.0113% (0.035) 0.02% (0.02) North East 0.6096% (0.609) 0.0113% (0.035) 0.02% (0.02) Re-Assessed 2005/6 Shrinkage Factors (Original values in brackets)

4. 2005/6 Shrinkage Factors Very little change to ASP No change to TOG A reduction of 0.0237% in OUG

5. 2005/6 Shrinkage Factors Widely accepted that 0.06% used in 2004/5 was too high. DNs proposed 0.0113% in 2005 based on Advantica report. Report challenged and a compromise figure of 0.035% was accepted in 2005. Advantica carried out additional work and verified model in June 2006. DNs used 0.0113% in 2006/7 shrinkage factors.

6. LDZ Procured LDZ Shrinkage Quantity (kWh) Assessed LDZ Shrinkage Quantity (kWh) LDZ Shrinkage Reconciliation Quantity (kWh) North240,510,455230,364,344- 10,146,111 North East308,285,346297,568,251-10,717,094 NGN Total548,795,800527,932,595-20,863,205 LDZ Shrinkage Reconciliation for the period 1 st October 2005 to 30 th September 2006

7. LDZ LDZ Shrinkage Reconciliation Quantity (kWh) Adjustment Value North- 10,146,111 -£190,941 North East-10,717,094 -£203,535 NGN Total -20,863,205 -£394,476 Section 2.2 of LDZ Shrinkage Adjustments Methodology Version 1.0 Financial Adjustment – Shrinkage Energy

8. Section 2.3 of LDZ Shrinkage Adjustments Methodology Version 1.0 Financial Adjustment – Commodity Charge LDZ LDZ Shrinkage Reconciliation Quantity (kWh) Adjustment Value North- 10,146,111 -£31,149.22 North East-10,717,094 -£32,902.87 NGN Total -20,863,205 -£64,052.10

9. Northern Gas Networks Total Financial Adjustment for Shrinkage in 2005/6 is therefore minus £458,528.10