EBCC MEETING 30 th April 2014

1. EBCC MEETING 30th April 2014

2. AGENDA 1.0 Introduction 2.0 Minutes and Actions 3.0 Operational Update 4.0 Modification Proposals 5.0 Significant Code Review Update 6.0 Bank Ratings 7.0 Review since October 2013 8.0 Focus for 2014 9.0 AOB - EU Update - Review of Winter 2013/14 - Risk Register - Voluntary Discontinuances 10.0 Date of Next Meeting

3. Operational UpdateMarch 2014

4. Operational Update • March 2014 • 1 Cash Call issued and paid on due date. • Cash Collection 100% • Rolling 12 Months 99.98%

6. Modifications

7. Modifications • Mod 0429 Customer Settlement Error Claims Process • Implemented on 1st April 2014 • Xoserve developed UNC framework guidelines for managing claims. • Xoserve will provide Transparency of quantity of claims received to EBCC Members. • Link to Modification 474S Inclusion of the guidelines relating to the “Customer Settlement Error Claims Process” within UNC governance and introduction of the User Pays charges associated with such claims – Consultation closes 7th May 2014.

8. Market Operator Security Provisions • Prepayment Agreement was concluded with an expiry date of June 2019 – awaiting signed document. • Deposit Deed is now in place.

9. Significant Code Review Update

10. Security of Supply Significant Code Review • OFGEM published their final proposal on 12th February 2014. • EBCC response provided to Ofgem on 11th April 2014. • Xoserve are currently working through the Business Rules to address the process through various internal workshops. • Work is currently underway to put in place operational procedures as per the mind maps previously discussed on the following slides.

11. Mind Maps - SCR • The following mind maps were put together to address areas which it was identified that additional work is required to operate a working through items highlighted as red. • Operating Process • Priority of Scoring for EBCC meetings • EBCC Operation • Relaxing Current arrangements EBCC

12. Reporting to ofgem/EBCC special arrangements Availability of CEO due to increased values Delegated Authority levels Review current rules Review sign off of credit payments Suspension of all services System access Delegation of Authority Operating Process Shipper information Emergency MOD MOD 233? Contact list Resource Cost Banking Services Temporary shared area Succession + capability Daylight Limit Skill set Exclude EBI availability Box account for communication NGD Daily limits Availability Operating limits Suspension of holidays WLB of key staff

13. Operating Process • Suspension of all Services • As a committee we need to address the areas currently within the powers of the EBCC • Review existing timescales and conclude what would be reasonable to suspend / relax? • System Access • existing rules for access require 5 day SLA need to agree special arrangements for identified resource – (On hold) • Cost • increase cost of resource consider how budget affected / may need to agree recovery via neutrality possible modification?

14. Powers and Duties of EBCC

15. Existing rules apply- due to arrangements drafting + under UK termination process S.1.7. No changes proposed. Market Operator Cash collection Consider suspension for a period beyond invoices issued and paid timing for convention of meeting EBCC Meetings Relaxing current arrangements Business rules FSR Security Cash calls Appeal Process Resource issues Extend time? Aggregate exposure Still issue Reduce or suspend appeal notice Payment terms extend ? Accepting LOC from lower rated organisations Agree with EBCC members no validation No appeal criteria Validate cash call suite % of exposure underwriting Manually update letters/notices as we do currently System solution for manual adjustment Timing extend?- 4pm – end of gas day Faxes? Scan, email or file interface Process going forward Suspending/ excluding peak SAP calc Communication of delivery Cost of funding change

16. Operating System continued • Modification 233v – Discussions with National Grid through the SCR workshops on redrafting modification. • Banking Services – We have discussed possibilities of increasing current overdraft facilities to establish if feasible and to what maximum limit. • Shipper Information:- We will be writing out to all Users to confirm contact details with an ongoing 12 month review.

17. Priority of Scoring EBCC meetings • Risk Categorising all parties to establish how to manage volumes of potential EBCC meetings in the event of an Emergency taking into account various sources of information. • Example on following slide provides a suggested template to identify High, Medium or low risk customers. • Aspiration to have this in place for all customers before Winter 14. • Reviewed monthly through monthly Operational Meetings and we will give some consideration on reporting requirements.

18. Ability to pay Communication interaction commercial intelligence reporting FSRs number of cash calls over previous period Level of helpfulness Payment trends Priority of Scoring For EBCC meetings Portfolio growth Over or under delivery trends Downgrade risk factor risk Party underwriting Graydons S + P How they act in market Security arrangements Moody’s

19. Priority Scoring - Low Risk Categorisation

20. Priority Scoring - Medium Risk Categorisation

21. Priority Scoring - Medium Risk Categorisation

22. Priority Scoring - High Risk Categorisation

23. EBCC Operation • Conflict of Interest • Minutes • Quoracy • Ofgem’s role • National Grid’s role

24. Establish who from Xoserve required National Grid input Minutes Review timing Conflict of interest Recording INCIDENT ROOM Checklists EBCC Operation Resources Ofgem’s role Quoracy Consider membership ofgem/another party Chair Availability Communication Priorities on order Of discussion Gemserve members appointment Agree Adhoc appointment process Factors

25. Bank Ratings

26. Current Position • Since September 2013 the global economic markets have remained fairly stable resulting in no downgrades outside of our forecast. • We advised members in September 2013 that Royal Bank of Scotland and National Westminster were likely to be downgraded and this was reflected in their downgrades in March 2014. • The following chart provides a summary of customers exposures to each rating category.

27. FI Risk Profile • 8% of all FIs currently providing Security have been subject to a downgrade change during the previous 6 months by Standard and Poors and Moody’s Ratings Agencies. • Currently 79% of FIs are in the lowest categories of investment grade rating. This reflects an 18% increase from the last reported figures. This is in part due to a movement within the same rating band.

28. Spread of FI Exposure £25,605,000 £62,000,000

29. Outlook • Moodys anticipate undertaking a rating review throughout 2014. Since Sept 2013 0% FIs are on possible downgrade. • S&P are commencing significant reviews across a large number of FIs, with 58% showing a negative outlook.

30. Deposit Deeds • Value of credit secured via Deposit Deed and LOC – comparison between April 2012 to April 2014

31. Summary • Whilst we have seen a slight increase in the overall value of security during the period April 12 to April 13, there is a consistent move to lower rated financial institutions within each rating category. • Continue to monitor those FI’s which are currently on possible negative outlook with Standard & Poors

32. Review since October 2013 Update

33. Review since April 2013 • Cash Collection figures on rolling 12 month performance remain the highest over the past 5 years. • Cash Collection Monthly figures 100% over the past 12 months on 10 occasions. • Continued pro-active engagement with Users reaching 70% of indebtedness to minimise Cash Calls. • No Terminations managed - No financial losses • Security Renewals 100% • Energy Balancing Credit Rules revised 16th June 2013 Mod 446S amendments to legal text in UNC Section X4 implemented – quoted legal text amended Section 7 - Appointment of Insolvency Practitioner. Mod 447s implemented to permit smearing of recovered debt where the debt predates the Code Cut Off Date – FAQs added to deal with termination. • Successful LRQA Audit

34. Cash Collection

35. Cash Collection Failure To Pay Notices

36. Cash Call Issued

37. Value of Cash Call Issued

38. FTPCCN’s – issued & paid

39. Focus for 2013/14 addressed at April 2013 meeting • From the meeting held in April 2013, the following key areas were identified to focus on :- • Increase the profile of the committee • Emergency Credit Rules • Watching brief on EU Reform • Members to review if there are any other significant areas that they would like the committee to focus on.

40. Focus EBCC Customer Satisfaction (Nov 12) • EBCC Customer Satisfaction

41. Year on Year Comparison

42. Focus for 2014/15 Update

43. EBCC Customer Satisfaction (Nov 13)

44. EBCC Customer Satisfaction Year on Year Comparison

45. Focus for 2014/15 • Carried forward from 2013 • Increase the profile of the committee • Significant Code Review • Watching brief on EU Reform • Focus for 2014/15 • Gemini Consequential change (UK Link Replacement programme) • Feedback from Customer Satisfaction (November 2013) • Exploitation of synergies with Neutrality finance • Members to review if there are any other significant areas that they would like the committee to focus on.

46. AOB

47. EU Third Energy PackageUpdate

48. Risk Register Update

49. Register Part 1 Risk Register as at 26/4/13 :

50. Register Part 2 Risk Register as at 26/4/13 :