Performance Assurance – Possible Scope

1. Performance Assurance – Possible Scope 20th March 2013

2. What are the current problems? • The Allocation of Unidentified Gas Expert (AUGE) has been working with Xoserve and industry parties to identify all of the issues that result in unidentified gas and also determine the value associated to date 3 issues have been considered in detail totalling £160m (AUGE Year 2012/13) • The industry recognises that there are a number of factors which play into “unidentified gas” – gas that cannot be accounted for due to data quality, data inaccuracy and missing information within the gas settlement process • These factors have arisen due to a lack of transparency, control and accountability within the gas market, since competition commenced – there is currently no performance criteria or assurance • ScottishPower believes that it is imperative that a similar situation should not be allowed to arise under the new settlement arrangements being developed through Project Nexus and equally that a Performance Assurance Framework should be developed as soon as possible, to the benefit of the industry ahead of the introduction of Project Nexus The big issue with the AUGE is that it is only allocating unidentified gas, it is not identifying and addressing the root cause. In addition there is limited accountability and incentive on them

3. Determining the scale of the problem.. • The AUGE has carried out extensive work on the current issues factoring into unidentified gas • Although it cannot be assumed that the same problems or scale of the problems will result in a “Post Nexus world”, the current problems may be an opportunity for quick wins prior to Project Nexus delivery through a Performance Assurance Framework: This is the equivalent to £160m of incorrect settlement – or roughly 6.5% of transportation costs The bulk of unidentified gas has still to be recognised, understood and apportioned The figures in the Table above come from the AUGE analysis in support of the 2011/12 Methdology. The consumption based methodology is expected to see much higher volumes and effects

4. What the AUGE has not recognised.. • There are a number of issues that the AUGE has not considered in relation to unidentified gas, including: • AQ Review • AQs of 1kWh • Low AQs • Non-update of AQs • Low percentage of AQs updating • CSEP rec close out • Unknown supplies • Incorrect meter index factors • Oversized meters • New LSP site – consumption ramp up • Suitability of DESC profiles There should be a standard process for highlighting errors, identifying root causes and implementing process or data fixes to address them

5. Things to consider…… • What could be included in a Performance Assurance Framework? • What elements need to be considered? • What reporting would be required? • Would auditing be necessary? • Should standards of service be set?

6. Scope of the Gas PAF Assures delivery of Nexus benefits and more robust and accurate settlement allocation

7. Data Quality - elements to consider Performance Assurance Framework Parties Governance Arrangements

8. Process – elements to consider Performance Assurance Framework Parties Governance Arrangements

9. Reporting required * All reporting would be on an individual Shipper basis

10. Elements to be audited * This audit could replace the RbD audit

11. Controls - Standards of Service * This reporting/audit could replace the existing Standards of Service