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Implementation of Trades and Transfers

This presentation provides an overview of the implementation process for trades and transfers in the National Grid NTS, including the surrender invitation and bid window processes. Important dates and instructions are outlined for users participating in the capacity allocation process.

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Implementation of Trades and Transfers

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  1. Implementation of Trades and Transfers National Grid NTS 5th June 2008

  2. Overview • Proposal 187A implemented 1 June 2008 • ‘Old’ (i.e. current RMSEC) rules will apply for June RMSEC, allocating July Capacity • First auction to which ‘new’ (187A) rules apply is July RMTTSEC for August Capacity • RMTTSEC process to kick off 20 June* with issue of Surrender Invitation • There will be some overlap of the RMSEC and RMTTSEC auction processes • *All dates in this presentation are indicative - a definitive timeline will be published at the start of the process • If there is any variance between this presentation and the legal text put in UNC, then the UNC takes precedence

  3. Surrender Invitation Surrender invitation letter issued [20] June via JO, Surefax and National Grid website Surrender invitation will specify: -The calendar month in respect of which the rolling monthly surrender invitation is made -The date (being within the next two business days) on which the surrender window will be open -The reserve price for Monthly NTS Entry Capacity at each ASEP for the relevant month Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results 2 b. days 5 b. days 20 June 29 July

  4. Surrender Window Surrender window open [24] June 08:00 hours to 17:00 hours on Gemini A User may make up to two offers per ASEP Offers can be withdrawn or amended within the window The User will have to accept terms and conditions before being able to submit a surrender offer - this will include a requirement to confirm that the User holds, and continues to hold, an amount of firm capacity equivalent to that offered for surrender in total (i.e. the aggregate of both bids) at each ASEP When placing a surrender offer, the User must specify: -The identity of the User -The relevant month -The ASEP -The amount (not less than the minimum eligible amount, 100,000kWh) being offered for surrender -The minimum price that the User wishes to be paid in respect of the surrendered capacity – NB there is no restriction on this price Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window Allocation Process User Results 2 b. days 5 b. days 20 June 29 July

  5. RMTTSEC Invitation RMTTSEC invitation issued [27] June via JO, Surefax and National Grid website RMTTSEC invitation will specify: -The date (being one of the 20 business days preceding the last business day of the month, and being not earlier than 5 business days after the invite is issued) on which the RMTTSEC bid window will be open -For each ASEP: -the quantity of capacity that has been offered for surrender a) below reserve, b) at reserve, c) above reserve -the amount of unsold capacity -the reserve price Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results 5 b. days 20 June 29 July

  6. RMTTSEC Bid Window RMTTSEC bid window open [4] July 08:00 hours to 17:00 hours on Gemini A User may have up to twenty bids per ASEP Bids can be withdrawn or amended within the bid window Users placing a bid must specify: -The identity of the User -The relevant month -The ASEP -The amount (not less than the minimum eligible amount 100,000kWh) of monthly capacity applied for -The minimum amount (not less than the minimum eligible amount) that the User is willing to be allocated -The bid price, which is not less than the reserve price Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results Bid window – one of last 20 b. days preceding last b. day of month 20 June 29 July

  7. Allocation Process The allocation process will take place from [4] July to [28] July Capacity will be allocated in 2 stages firstly via the ‘initial stage’ (at the ASEP) and secondly via the ‘trade and transfer’ stage (between ASEPs), with the general principles being: -Capacity will be allocated to the highest priced bid first -Capacity allocations will utilise the lowest priced available capacity first and in the following order across both the initial allocations stage and the trade & transfer allocations stage: 1) Surrendered Capacity below reserve price 2) Surrendered Capacity at reserve price 3) Unsold Capacity 4) Surrendered Capacity above reserve price Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results Bid window – one of last 20 b. days preceding last b. day of month 20 June 29 July

  8. Initial Allocation Stage • All bids ranked in order of price (highest first) at each ASEP • Capacity allocated to highest priced bids first • Where the amount applied for exceeds the available (surrendered and unsold) capacity, the User will be allocated the remaining unallocated amount • Where two or more bids specify the same bid price, the allocation will be pro rated • Where the amount to be allocated does not meet the minimum amount criteria, the bid will be disregarded from the initial allocation stage and an allocation made between the other equally priced bids or the next highest priced bid (as relevant) • Surrendered capacity will only be allocated where the bid price is equal to or higher than the minimum surrender price • All unallocated and partially allocated bids remaining unsatisfied at the end of the initial allocation stage will progress through to the trade and transfer allocation stage • ASEPs with unsatisfied bids remaining progress through to the T&T stage as Recipients, ASEPs with unsold or surrendered capacity remaining progress through as Donors

  9. Trade and Transfer Allocation Stage • Unsatisfied bids ranked in price order (highest first) at each ASEP • All unsatisfied bids at each ASEP will be grouped such that each unsatisfied bid group contains 25% of the total unsatisfied bid volume for that ASEP • Bids will be kept whole and where a bid falls across two groups, it will be included in the higher group • Where two bids have the same bid price, they shall both be included in the higher group • Where a group contains more than 25% of the unsatisfied bid quantity, the size of the next group will be reduced accordingly (i.e. Group1 at ASEP A contains 30% unsatisfied bid volume so Group2 will contain 20%) • This could result in less than 4 groups for each ASEP • The bid group price (a Weighted Average Price) will be calculated for each group • The bid groups for all ASEPs will be ranked according to bid group price, with the highest ranking first. Where two or more groups for the same ASEP occur consecutively, they will be amalgamated for the purposes of calculating exchange rates • Bid groups will be allocated against in descending order • The bid group price is used purely for the initial ranking, it will not be recalculated during the process

  10. Applying Exchange Rates • National Grid will consider each unsatisfied bid group in turn (highest first) and identify the most favourable Donor ASEP with reference to the inter-ASEP exchange rate applying between them • Capacity will be allocated from the most favourable Donor first (i.e. closest to 1:1) • The exchange rate will be calculated on the basis of the remaining unsatisfied bid volume within the group, regardless of whether that could be met wholly by that Donor ASEP • Where a Donor cannot satisfy all of the bids in the group, the bids will be allocated against in price order (highest first) • Equally priced bids will be sorted according to time stamp • Where no more allocations can be made from the Donor and there are unsatisfied bids remaining within the unsatisfied bid group, the next most favourable Donor will be considered • Where no more allocations can be made from any Donor and there are unsatisfied bids remaining within the bid group, those bids will drop down to the next bid group for that ASEP (unless there are no more, in which case they will be rejected) • Once a bid group has been fully allocated against or all unsatisfied bids have dropped to the next bid group for that ASEP or been rejected, the next highest ranking unsatisfied bid group will be considered and the process repeated • Allocations will not be made where • The exchange rate is higher than 10:1 • The unit price (bid price/exchange rate) is higher than the minimum surrender price for surrender offers • The amount to be allocated is less than the minimum amount criteria

  11. User Results Users who submitted bids will be informed of: -The bids in respect of which an allocation was made -The amount of Monthly Entry Capacity held for the relevant month -The amount of NTS Entry Capacity held for the relevant month Users who submitted surrender offers will be informed of: -The amount of capacity that the User offered for surrender -The aggregate amount of capacity that was accepted as surrendered -The weighted average unit price in respect of each surrender offer Individual Users who placed bids or surrender offers will be informed of their results via Gemini on [28] July Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results 20 June 1 b. day

  12. Aggregate Results -Standard auction related information e.g. highest / lowest accepted bid prices, weighted average bid prices -The amount of capacity allocated through the initial allocation stage -The amount of capacity allocated through the trade and transfer stage -The aggregate amount of capacity offered for surrender and the aggregate amount of capacity accepted as surrendered -The amount of capacity remaining unsold and therefore available for daily auctions -The order in which bid groups were ranked -For each recipient ASEP, the highest and lowest bid price and the weighted average bid price -The weighted average inter-ASEP exchange rate for each combination of Recipient-Donor ASEP pairs All Users will be informed of the aggregate results via Gemini and the National Grid website on [29] July Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite User Results 20 June 1 b. day

  13. ‘Old Rules’ June RMSEC Timetable for July Capacity 23 June RMSEC Bid Window and User Results 16 June RMSEC Invite 24 June Aggregate Results Surrender Window Aggregate Results Surrender Invite RMTTSEC Bid Window RMTTSEC Invite Allocation Process User Results 20 June 29 July

  14. Additional Information • Inter-ASEP exchange rates will be published after each auction • This will allow a picture of indicative exchange rates to be built up • It is envisaged that in time, as experience is gained, the 15 days for allocations will shorten • Process is to be run manually until Gemini solution can be implemented • Receipt of decision to implement Mod 187A not being received until late April means that a Gemini solution will not now be in place until April 09

  15. Contacts • For questions on the Modification: • Chris Wright – BGT – 01753 431059 • Fergus Healy 01926 655031 • Claire Dykta 01926 655915 • For questions on the Methodology Statement: • Andrew Fox 01926 656217 • For questions on the Auction • Chris Gumbley 01926 654071 • Dave Wagstaff 01926 654045 • Kay Haycock 01926 655342 • Andy Nixon 01926 654132 • capacityauctions@uk.ngrid.com • A further run through of the RMTTSEC process will be given to the Gas Operational Forum • 10th June, 10:30am, Radisson Grafton Hotel Tottenham Court Road ANY QUESTIONS?

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