1. Incremental Entry Capacity Release Methodology Statement Review 2005 Transmission Workstream - 15th June 2005

2. Background  IECR describes methodology to be applied by Transco NTS for release of incremental capacity i.e. above obligated capacity  in place since July 2002  Special Condition C15 paragraph 2 of NTS GT Licence: “…licensee shall before 1st July of each formula year prepare and submit for approval by the Authority an IECR methodology statement…”

3. Proposed Amendments -Summary  Housekeeping Changes  New Licence References  Section 2 “Incremental Investment Costs”  Pipeline Costs Updated  Section 3 “Cost Calculation” clarifications  No Change to Methodology  Clarification of Investment Lead Times - “three years or more”

4. Investment Lead Time -Issue  Three year lead time typically sufficient to physically deliver incremental capacity  Exceptional circumstances beyond NGT’s control may require more than three year lead time:  planning permission  construction challenges  unexpected requested volumes  Fixed 3 year lead time likely to give rise to inappropriate costs for NGT and Industry Can we clarify when more than three year lead time appropriate?

5. Investment Lead Time -Proposal  If known pre-auction that greater than 3 years required  NGT to propose revised lead time to OFGEM indicating reasons  Ofgem could consult users with UCA proposal  If agreed, required lead time included in auction tender  If known post-auction that longer lead time required  NGT to propose revised lead time to OFGEM as part of proposal to release incremental capacity indicating reasons  process follows Special Condition C8B 14(5)(b) of GT Licence

6. Consultation  Responses requested by 24 th June 2005 to Nick Pittarello NGT House Warwick Technology Park Gallows Hill Warwick CV34 6DA  Email: Nick.Pittarello@ngtuk.com