1. GVC Group Update Andy Pace 6 October 2011 1 | Energy Networks Association - DCMF

2. GVC workshops 2 | Energy Networks Association – DCMF The series of five industry-wide workshops is now complete, covering: A general overview of the losses incentive and the two “top down” methodologies proposed for data correction. The data available to DNOs that might provide a basis for other correction methodologies Possible amendments to the BSC to improve losses reporting. Outcomes: No additional data sources have emerged. No new methodologies for data correction have emerged to date. Potential modifications to BSC have been identified to improve future reporting. 6 October 2011

3. Potential BSC Modifications 3 | Energy Networks Association – DCMF 14 options discussed at workshops of which two have progressed to formal modification proposals: Abandoning the principle of gross volume in settlements and stopping compensatory adjustments (P274). Extending BSC Performance Assurance (P275) In the context of the Losses Incentive: None of the options discussed could address historic issues or a general increase in supplier data cleansing after target setting. There is an underlying concern that the losses incentive is unable to deliver on its objectives of encouraging DNOs to achieve an efficient level of losses on their distribution networks. The GVC Group have written collectively to Ofgem, expressing these concerns. 6 October 2011

4. BSC Proposal P274 4 | Energy Networks Association – DCMF P274 ‘Cessation of Compensatory Adjustments’ P274 proposes to amend the BSC so that ‘crystallised’ errors cannot be compensated for in subsequent Settlement calculations. A direct consequence of this would be to remove the process of Gross Volume Correction (GVC). GVC is a technique which Suppliers can currently use to correct ‘crystallised’ errors (i.e. errors for Settlement Days which have been through a Final Reconciliation (RF) Run) by altering volumes for other Settlement Days which have not been through RF. P274 will impact Suppliers and Non Half Hourly Data Collectors, and is intended to benefit Suppliers and Distributors. 6 October 2011

5. BSC Proposal P275 5 | Energy Networks Association – DCMF P275 ‘Extending BSC Performance Assurance’ P275 proposes to broaden the responsibilities and scope of Performance Assurance under the BSC to include all BSC Parties, rather than just Trading Parties. It also proposes that Performance Assurance should consider the risks that Settlement data issues may present to BSC Parties that make use of this data for purposes other than the determination and settlement of Trading Charges. P275 will impact all BSC Parties, particularly those who are not Trading Parties (e.g. Distributors, Interconnector Administrators and the Transmission Company). The BSC Panel will consider the Initial Written Assessments at its meeting on 13 October 2011, when it will agree how to progress P274 and P275. 6 October 2011

6. Next Steps 6 | Energy Networks Association – DCMF 6 October 2011 Ofgem’s Timetable for Close-out of DPCR4 Losses Incentive Oct 2011Consultation on settlement data correction methodologies Jan 2012Decision on settlement correction methodologies Jan 2012Issue SP losses restatement decision Jan – Apr 2012Review of 2009-10 losses for other DNOs affected by data correction in light of decision on methodology July 2011 – Mar 2012 Process of data gathering for DPCR5 ALP and DPCR4 LRRM including data correction methodology adjustments April 2012Finalisation of calculations May – June 2012Consultation process on DPCR4 LRRM and DPCR5 ALPs July 2012Issue ALP / PPL directions November 2012Deadline for directions giving PPL and ALP values