1. FR-UK-IE Regional Initiative Cross-Border Balancing Procurement 26 Nov 2007 John Prime

2. 5 Principles  Competition  Enhanced Balancing Services procurement in respective control areas  Transparency and non-discriminatory access  Inherently transparent arrangements with no impact on TPA  Preserving security of supply  Must not endanger system security in the local area  Inter-TSO Emergency arrangements remain  Compatibility and reciprocity  Reciprocal arrangements between GB and French markets  No Interconnector Capacity Reservation  Unutilised IFA capability identified post gate-closure

3. Process 23:00 All times approximate GMT D-1 D Y-1/M-1 Start 07:45 01:00 23:00 IFA Contract Day Secondary Mechanisms Re-Alloc’n/Assign’t 06:00 LT Transfer Nomination New Reciprocal Balancing Arrangements NGET and RTE formulate balancing offers in D+xh timescales, only after all commercial intraday nominations have been completed following the respective Interconnector Intraday gate closure (Day Ahead Nomination) UIoSI rule implemented for unused LT capacity 03:0005:0007:0009:0011:0013:0019:0021:0017:0015:00 XX:00 13:00 UIoLI rule implemented for unused LT+DA capacity XX:00 * 12 Intraday Gates illustrated See next slide etc Rolling hourly pricing of SO-SO balancing offers for service delivery at x+1h. Offered prices based on those in the deliverer’s domestic BM. User capacity rights and volumes unaffected as per the previous slide with SO-SO balancing services superimposed over User’s volumes.

4. Timing Illustration 04:00 05:00 06:0007:00 08:00 Interconnector Intraday gate closure Period of activation Delivery period BM Services can only utilise unused and available interconnector capability following each intraday gate closure. TPA capacity allocation mechanisms in all timescales not impacted by balancing service actions. Formulation of balancing services offers Publication of prices

5. Activities Pre Gate Closure: Normal TPA access arrangements TSOs may NOT reserve IFA capacity TSOs calculate and exchange inter-TSO balancing bids/offers (interim solution) TSO bids/offers are published (interim solution) At Gate Closure: Market participants submit final notifications, nominations and BM bids/offers Participants may no longer trade over the IFA TSOs calculate residual IFA capability Post Gate Closure: TSOs calculate and exchange inter-TSO balancing bids/offers TSO bids/offers are published TSOs notify bid/offer acceptances Delivery of accepted volumes Details of TSO transactions are published

6. Pricing and Volume Principles  Prices submitted close to GB Gate Closure  Prices Curve  Different prices for different tranches of volume  Prices will be cost-reflective and will reflect forecast conditions in real time  Market Imbalance (NIV)  Bid and Offer prices available in BM  Transmission constraints  NGET will NOT sterilise reserve in GB  NGET will take on a limited degree of pricing risk  Volume will initially be limited to 500MW  To be reviewed after a suitable period of operation (initially proposed as 1 year)

7. Implementation Timetable (Interim)

8. Implementation Timetable (Enduring)

9. Interim (Hybrid) Solution  Manual work-around based on current BASA  Significantly increased functionality  TSOs exchange 6 prices at day-ahead stage  Price windows correspond to current intra-day gate closure in French market (subject to availability of IFA capacity)  National Grid will have ability to re-submit prices intra-day  Price exchange and acceptance based on present arrangements  Implementation targeted for August 2008

10. Summary – Enduring Solution  “Real Time” Balancing, after IC Gate Closure  Hourly prices, set 1-hour before delivery  Price Curve – prices in 100 MW tranches  Prices influenced by anticipated real time energy and transmission issues  Volume - initially maintain current 500 MW cap  Implementation targeted for July 2009

11. FR-UK-IE Regional Initiative Cross-Border Balancing Procurement 26 Nov 2007 John Prime