UNC Mod 0391 Charging Proposals for DN Entry Under Option 3 (shallow boundary with entry charge)

1. UNC Mod 0391 Charging Proposals for DN Entry Under Option 3 (shallow boundary with entry charge) David Pickering 22 November 2011

2. Transportation of Distributed Gas Impact of Distributed Gas NBP ECNCharge (2012) NTS Exit Capacity Avoided or Lower costs Entry from NTS LDZ System Charge LTS Avoided or Lower costs Distributed Gas Distribution Tiers Entry Facility New costs Service Pipe Emergency Service Customer Charge Unaffected Supply Point

3. Connectee Gas production facilities Connection pipe Compression prior to entry CV enrichment Distribution Network Network reinforcement or within–network compression Additional network opex Which Costs are Incurred by each Party? Either? • Pressure/Flow control • Gas Quality Monitoring • Metering • Odorant Injection • Shut-off valve • Telemetry and control equipment

4. Which cost variations should be taken into account? • Deemed Reduction in NTS Exit Capacity bookings • Lower Usage of network pipeline tiers • Variation in Entry equipment costs between NTS-DN offtakes and Distributed Gas entry points • Specific Reinforcement or (if feasible) within network compression and additional operating costs

5. Derivation of Credit for Reduced LDZ System Usage • Credit based on sum of typical usage costs for higher pressure tiers • Should some credit be provided for LTS connection? • Approximately 70% of LDZ System charges relate to Low Pressure tier costs • Should there be any credit for lower LP tier usage be given? • Similar credit applied in respect of LDZ System commodity usage

6. Entry Charge for Entry Facility Costs • Where DN provides and operates the entry facility covering Pressure/Flow control, Metering, Gas Quality Monitoring, Odorant Injection, Shut-off valve, Telemetry and control equipment • Charge as fixed cost per annum or convert to capacity charge?

7. Entry Charge for Network Reinforcement or Compression • Where DN undertakes pipeline reinforcement or installs within-network compression so as to enable gas to be entered into system • Charge as fixed cost per annum or convert to capacity charge? • Opex has large fixed maintenance element so keep as fixed?

8. Example of Potential Entry Charge • Should individual charge elements be updated each year in line with other transportation charges? • Should capacity basis be fixed at the time of connection? • Is it worth having a separate commodity credit element for system tier usage? • Should all charges be converted to equivalent fixed elements at the time of connection based on parameters at that time so that a single fixed charge or credit can be invoiced?

9. NTS SO Commodity Charge • Currently charged by reference to supply points, so all gas (including Distributed Gas) pays • Charge = 0.0221 p/kWh (April 2012 indicative) • Currently not included in the Mod 391 proposals, but probably appropriate that distributed gas should not pay this charge • Should a new Mod be raised, or should the Mod 391 proposals be amended to accommodate? • If Mod 391 amended, may delay progress of Mod due to need for Transmission to be involved, however, would enable a holistic implementation discussion with Xoserve to take place