1. Cross Border Balancing - 2Hr Product NGET and RTE Paper

2. Overview  NGET & RTE action at 22 nd March FUI IG meeting to provide a summary paper on 2hr product addressing –  NGET requirement for a 2hr product  Assessment of the impact of BALIT solution without a 2hr product  RTE’s concerns with a 2hr CBB product  Propose Alternative Solution

3. NGET Requirements for Long Duration (> 1hr) Products  The current CBB Interim arrangements are utilised for Energy, Margin, Contingency and Constraint management considerations  Provisions allow agreement of ‘non-rigid’ transactions which may be > 1hr -  Avoids commitment of alternative high cost actions e.g. additional generation synchs  Allows peak demand points to be efficiently managed  CBB transactions play an important role in managing Southern Network constraints, including London security, due to the strategic location of IFA  Dayahead exchange of data allows CBB to be ‘firmly’ assumed in Operating Plans to offset other contingent actions e.g. warming

4. NGET Proposal for a 2Hr CBB Product  The BALIT 1 hr arrangements would allow CBB to be utilised against other in-gate BM actions but not against long notice actions or longer duration requirements.  NGET proposed inclusion of a 2 Hr product with a 2 hrs lead time to increase the opportunities for BALIT to be utilised for broader system balancing purposes -  2 hrs duration being generally sufficient to cover most operational requirements  2 hrs Lead time would allow opportunity to avoid commitment of alternative actions

5. NGET Assessment if no 2hr Provisions Available  Lack of 2Hr Provisions could be managed through reliance on alternative actions but would result in increased costs –  Increased Operating Plan Contingency costs in the form of generation warming  Assessment of 09/10 Plans has highlighted a £6.98m saving through inclusion of CCB as contingency in SOPs  Increased BMU commitment for margin and/or constraint reasons  Assessment of 09/10 Plans substituting CBB with replacement generation, allowing for a typical minimum run time of 3.5, would have increased the full year operating costs by £27m

6. Concerns of RTE  2hr product in parallel with standard 1hr product would  Jeopardize further extension of standard mechanism to other borders  Lead to over-inflated prices and make standard product offered to other TSOs more scarce  Could lead to sub-optimal operation of Balancing Management in France and, in some particular cases, to endanger the Security of Supply of the French Transmission System

7. Alternative Solution – ‘BALIT Extension’  New proposal to achieve 2 hr delivery through enhanced obligations around the BALIT arrangements -  TSO to inform as soon as possible if the ‘BALIT Extension’ service is to be withdrawn in keeping with the existing good practices  Acquiring TSO gives notice of intent by no later than 2 hours ahead  Acquiring TSO activates BALIT volume in the first hour  If no BALIT volume in 2 nd hour then Delivering TSO will deliver energy through the ‘BALIT Extension’ service and settle at a pre-agreed Excess Energy price  With these enhanced obligations CBB can be assumed in Operating Plans unless rejected at the requesting stage.  It is proposed to maintain this ‘BALIT Extension’ service until 1 st April 2012  This will allow a detailed review to be undertaken after 1 year  It is proposed that the service will terminate on 1 st April 2012 such that any extension of these arrangements beyond this date would require common agreement between Ofgem, CRE, NGET and RTE

8. Alternative Solution – ‘BALIT Extension’