Mod 0262 - Clarifications

Transmission Workstream 6 August 2009

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Background

UNC mod proposal 0262 “Treatment of Capacity affected by Force Majeure”, brought forward by National Grid NTS proposing:

introduction of a Force Majeure Rebate to Users at a Network Point where FM has been declared:

the FM quantity prorated between those Users registered as holding capacity at the affected point taking into account Unsold Capacity.

application of a WAP of each Users registered capacity holdings multiplied by the prorated quantity

Applicable to Capacity only but includes both NTS Entry & NTS Exit (Flat) Capacity

National Grid NTS to recover the rebate via the appropriate TO/SO Commodity charge

a reduction (when required) in the Users entitlements, by the prorated quantity, at zero price

Proposal taken to July mod Panel with a request that it be issued for consultation. Panel decision was to refer back to Transmission Workstream for further discussion/clarification

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The mod panel asked for clarification on the following..

What is the planned mod implementation date?

1 October 2009

Can Legal Text be provided

We have requested suggested legal text & it will be provided at the earliest

opportunity.

How would this apply to DNOs

The proposal will only apply to DNOs, as a User of the NTS, from 1 October

2012 (Enduring NTS Exit Regime), this is implicit in the proposal as the mod

only refers to Annual NTS Exit (Flat) Capacity and makes no reference to

NTS Exit Capacity.

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Clarifications ctd…

What would happen if the User failed to respond to National Grid NTS’

request for Buyback/Forward Offers

Such a failure would put the User in breach of their UNC obligations,

National Grid NTS would expect this in itself to be sufficient to ensure

compliance.

The mod appears to indicate that silence can be deemed as acceptance, is

this acceptable under contract law?

National Grid NTS has sought legal clarification on this point and will either

provide an opinion at the workstream or amend the Proposal beforehand.

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Clarifications ctd…

How would the FM Rebate be calculated?

The FM rebate will be calculated individually for each User, National Grid NTS would

expect the legal text to contain an equation similar to the following:

where:

n is the number of successful capacity bids

P is the bid price for each successful capacity bid

Q is the amount of capacity allocated pursuant to each capacity bid

n

ii

n

iii

Q

QP

1

1

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How would the FM Rebate be calculated?

4 Steps Required:

Step 1 - Calculate the Adjusted FM amount

FM amount – Unsold Capacity – any Daily Firm Capacity sold on the day of the FM notification

Step 2 - Calculate the Prorated Amount

Users entitlement @ ASEP / Sold Quantity @ ASEP * Adjusted FM Amount

Step 3 – Calculate WAP

Sum of each successful bid * bid price / Users Registered holding

Step 4 – Apply WAP to prorated Amount

WAP * Prorated Amount

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Example

ASEP X

FM Notice Issued 1 August

Duration 1 Month (31 Days)

Obligated Level 500GWh/day

FM Amount 100GWh/day

Unsold Capacity 50GWh/day

Number of Users 4

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Step 1 – Calculate Prorated amount

Shipper Users

Registered

Holding

GWh/day

Sold Quantity

GWh/day

Adjusted FM

Amount

GWh/day

Prorated

Amount

GWh/day

A 100 450 50 11.11

B 150 450 50 16.66

C 90 450 50 10.00

D 110 450 50 12.22

Step 2 – Calculate Prorated amount

FM Amount

GWh/day

Unsold Capacity

GWh/day

Daily Firm Capacity sold

on day of FM notification

Adjusted FM amount

100 50 0 50

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Step 3 – Calculate WAP

Shipper Users

Registered

Holdings

GWh/day

BIDS

GWh/day

Bid

Prices

Bid Value

A 100 30 0.0079 237000

25 0.0082 205000

45 0.0085 382500

B 150 60 0.0079 474000

50 0.0081 405000

40 0.0085 340000

C 90 40 0.0079 316000

35 0.0085 297500

15 0.0091 136500

D 110 55 0.0079 434500

45 0.0083 373500

10 0.0089 89000

Shipper WAP

A 0.0083

B 0.0081

C 0.0083

D 0.0082

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Step 4 – Apply WAP to prorated quantity

Shipper Prorated

Amount

GWh/day

WAP FM Rebate

Amount 1

FM Rebate

Amount August

A 11.11 0.0083 £922.22 £28,588.89

B 16.66 0.0081 £1350.00 £41,850.00

C 10.00 0.0083 £830.00 £25,730.00

D 12.22 0.0082 £1002.22 £31,068.89

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Proposed Timeframes

Proposal discussed Workstream 06/08/09

Mod Panel 06/08/09

Issued for Consultation 07/08/09

Closeout for Representations 26/08/09

Mod Panel Recommendation 03/09/09

FMR submitted to Ofgem 04/09/09

Proposed Implementation date 01/10/09