RG 0291 – July 2010 Workshop

1. RG 0291 – July 2010 Workshop Cashout actions and further considerations

2. Actions RG0291 006 and 007: ‘Linepack Build’ • 2009/10: 675MCM or 7,400GWh in Residual Balancing Actions • Gross trade value of £74M (Sell £42M, Buy £31M), net £12M • 202 Trade days (Buys on 94, Sells 108), hence potential for build up of Linepack on 163 days • Total ‘build up’ on these non trade days = -12MCM • If ‘build up’ was bought / sold at SAP then ‘cost’ = ~£774k • i.e. £774k cost would be recovered via neutrality • However, NG is unlikely to trade exactly @ SAP thus there is a perceived inefficiency associated with NG’s balancing actions • If we assume “inefficiency” is difference between SMPs & SAP then potential inefficiency for market = ~£854k • Total potential net misallocation (when applying SMPs) = -£1.63M

3. Actions RG0291 008 – ‘Refinement of Operational Costs’ • Last review group we presented that ~95% of compressor fuel is used to transport gas from the main entry points around NTS • Therefore operational cost of managing daily shipper imbalance within Linepack is somewhere within the remaining 5% • In 2009/10 2,437GWh used as Compressor Fuel • Cost of Compressor Fuel used = £33M • Total system throughput = 1,127,355GWh • Gross system imbalance = 28,738GWh (3% of total) • Using the assumption that NG has had to use 3% of compressor fuel to manage this imbalance gas, an SMP can potentially be derived; • (Total compressor fuel cost x % of imbalance vs throughput) / annual system imbalance • (£33M x 3%) / 28.738GWh • 0.00297p/kWh

4. Actions RG0291 010 – ‘System Length vs SAP’

5. Actions RG0291 008 - continued