1. Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. RG 0291 – Cumulative Linepack Option 11 August 2010

2. Outline  Linepack Product  Strawman  Cumulative Linepack – example  Next Steps

3. Linepack Product  C27 Licence obligation to consult and if appropriate, introduce a Linepack Product;  Primary objective is to establish a market value for the use of Linepack flexibility  Cashout “Default System Marginal Prices (SMPs)” can be a proxy for User’s access to Linepack flexibility  System Operator (SO) Incentive to keep daily NTS Linepack change within 2.8 mcm – this restriction might be deemed an inefficient use of Linepack flexibility  Does the Linepack incentive preclude Users from accessing, and placing a market value on their of use of Linepack?

4. Summary  Cashout “Default SMPs”;  Are a proxy for User’s use of Linepack flexibility  Default SMPs are outdated and require updating  Is original Default SMP calculation still relevant today?  Linepack;  Users have access to Linepack flexibility but it is valued through the Default SMPs rather than conditions on the day  Is it still appropriate to incentivise National Grid NTS to minimise Linepack flexibility in this manner

5. Strawman  SO Incentive for Linepack (LP) Measure is removed  National Grid NTS continues to manage LP within set boundaries (calculated daily based on competing LP uses)  Re-introduction of Users’ cumulative imbalance quantity but modified:  Cleardown of Users’ cumulative imbalance by either rolling [20] Day period or, a day when National Grid NTS takes a Market Balancing Action  Cumulative imbalance charge might be fixed diff (SMP – SAP) based on operational cost (compressor fuel + pipe space)

6. Users’ cumulative imbalance – Rolling [5] Day example Day 1Day 2Day 3Day 4Day 5Net S1 Daily imbalance10-10 200 cumulative100-10-200 S2 Daily imbalance20 -10 40 cumulative 2040605040 S3 Daily imbalance20-1020-101030 cumulative 2010302030 Total cumulative50030-302070  Users’ rolling cumulative imbalance (CI) ‘cleared’ every [5] days or when National Grid NTS takes a Market Balancing Action  CI charged at SMP differential dependent on direction of imbalance  Revenue into Balancing (or Capacity?) Neutrality

7. Questions  How do we deal with seasonal Linepack build i.e. the value we see in LP?  Create an LP account as per Residual Balancer Role to trade gas to increase LP in winter and sell in summer?  Could there be an incentive around this?  Are there any unintended consequences?  Should this option be considered in conjunction with a Linepack Product e.g. Inter-day Park & Loan?

8. Next Steps  National Grid (through Joint Office) to facilitate additional Workshops to discuss / develop business rules  Raise draft proposal  Others….