1. © Energy UK April 2012 Transmission Workgroup – 4 th April Financial Commitment for Incremental Capacity Presentation by Energy UK www.energy-uk.org.uk t @energyukcomms

2. © Energy UK April 2012 Financial Commitment for Incremental capacity 2 Where investment is required: Commitment will be demonstrated by providing security to cover an amount derived from the revenue driver. Where no investment is required: How will commitment be demonstrated? There is no revenue driver Agree it should not be a free option Some kind of financial commitment seems appropriate

3. © Energy UK April 2012 Options to demonstrate commitment where no investment is required Financial Commitment for Incremental capacity 3 Reservation Fee Security placed at start of phase 2 to cover the Reservation fee Security called up on and fee paid if capacity not allocated (developer pulls out) Just book it At start of phase 2 book capacity for desired delivery date Creates a 4 year user commitment form the delivery date To fine tune booking upwards – additional booking is necessary To fine tune booking downwards – would have to wait until user commitment is met User commitment applies whether or not project goes ahead Just book it with additional rules As above but with additional rules to allow for changes to delivery date and fine tuning of quantity

4. © Energy UK April 2012 Issues for each option Financial Commitment for Incremental capacity 4 The relative level of cost for each option is the main driver for determining a favoured option The start of Phase 2 is very early in a project lifecycle The final investment decision is many years away Developers will have limited funds available at this time Reservation Fee Provides certainty over capacity booking Provides a mechanism for fine tuning and amending delivery dates Consistent with PARCA principles where investment is required Just book it Provides certainty over capacity booking Opportunities for fine tuning and amending delivery date limited Risky if planning not successful Just book it with additional rules Additional rules to allow for changes to delivery date and fine tuning of quantity add complexity

5. © Energy UK April 2012 Summary Financial Commitment for Incremental capacity 5 Cost to the project is a key issue If the Reservations Fees option is less than the Just book it options this is favoured Developers will have limited funds available at this time Provides certainty over capacity booking Provides a mechanism for fine tuning and amending delivery dates Consistent with PARCA principles where investment is required Avoids the need to create new rules for flexibility