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  1. Modification 500 slides for Workgroup Malcolm Montgomery Matthew Hatch

  2. Session 1 – Primary Processes • Auction Overview • Process Overview • Joint Booking Platform • Available Firm Capacity • Ascending Clock Auctions • Uniform Price Auctions

  3. CMP Surrender CMP LT UIOLI Transfers Scale backs Buy backs Unbundling Voluntary Bundling Tariffs & Charging Methodology Transitional Arrangements Contingency User PRISMA Registration Credit / Invoice / Over-run / Neutrality / Termination / Voluntary Discontinuance PRISMA Content – Further Sessions Secondary Processes Supporting Processes

  4. CAM/CMP high level auction overview TSO informed of bundled/unbundled split LT UIOLI, Oversubscription, +Prices NG Compile auction data Post auction processing NG & Shipper inventory GEMINI Surrender cut-off Calculate bundle Auction Invite(s) Run Auctions Publish results PRISMA CAM calendar Surrenders On going View auction Submit bids Receive outcomes View info Receive invoices SHIPPER TSO informed of bundled/unbundled split Compile auction data Other TSO TO BE DEFINED BY OTHER TSO

  5. Annual Yearly Interconnector Capacity Auction Annual Quarterly Interconnector Capacity Auction Rolling Monthly Interconnector Capacity Auction Rolling Day Ahead Interconnector Capacity Auction Interruptible Rolling Day Ahead Interconnector Capacity Auction Within Day Interconnector Capacity Auction Annual NTS Interconnector Capacity Quarterly NTS Interconnector Capacity Monthly NTS Interconnector Capacity Daily NTS Interconnector Capacity Interruptible NTS Interconnector Capacity Daily NTS Interconnector Capacity Interconnector Capacity & Auctions Auction Capacity

  6. CAMStandard capacity products - auction calendar * All times are GMT for winter and BST for summer

  7. PRISMA • CAM Regulation requires that TSOs offer capacity via a joint web based booking platform. • NG launched open letter consultation on PRISMA. • NG is now signed up as a shareholder of PRISMA along with other TSOs in (NW) Europe. • Users will need to complete Registration on PRISMA before using PRISMA functionalities. • Relevant User data will be exchanged between NGG and PRISMA for the purposes of completing processes within modification 500.

  8. NG / PRISMA Processes Overview PRISMA Processes User Registration Credit Limit Grid Point Data Maintenance Surrender Request Secondary Transactions Run Auction User Registration Credit Sanction Surrender Process Set up Auction Process Results Transfers Add Location NG Processes Assignment Scalebacks Oversubscription Tariffs Recall Buybacks LT UIOLI Invoicing

  9. Available Firm Capacity Unsold Technical NG Available Capacity Adjacent TSO Available Capacity Surrender PRISMA LT UIOLI Over-subscription Available Bundled NG Technical Capacity = Licence Baseline Available Unbundled

  10. Y+6 to Y+15 Y+1 to Y+5 - 20% of Technical Capacity - 10% of Technical Capacity Technical Capacity Set Asidefor shorter term auctions • Relevant for Annual Yearly Interconnector Auctions only • In the event that technical capacity has sold out to more than 80/90% for a relevant gas year then all remaining unsold technical capacity will be set aside for shorter term auctions.

  11. Uneven sold profile over Year Y Technical Capacity (80/90% level) Unsold ‘a’ Unsold ‘b’ Unsold ‘c’ Unsold ‘d’ Sold Q2 Sold Q3 Sold Q1 Sold Q4 • Technical Capacity made available for the year above in an Annual Yearly Auction = ‘b’

  12. CAM Cross border bundling - unsold capacity NG Adjacent TSO(s) Available Capacity Unbundled Available Capacity Available to ‘bundle’ Where more available firm capacity exists on UK side – NGG may offer excess as unbundled product

  13. Restriction in sale of unbundled capacity (>Y+1)

  14. Available Interruptible Capacity • In line with existing UNC provisions. • Entry Release (as per UNC Section B 2.5.10): • Exit Release (as per UNC Section B 3.6.2): • Reverse Flow • An amount equal to the forward flow technical capacity.

  15. Ascending Clock Auctions

  16. Ascending Clock Auctions – overview Allow Users to place volume bids for capacity in bidding rounds at pre-defined prices (starting with the reserve price) The price increases in each round (by the Large Price Step) until the demand for capacity has reduced such that the bids can be allocated in full But if a First Time Undersell happens (when aggregate demand is first less than the offered capacity) a further bidding round will be undertaken with the price equal to the previous round’s price plus the Small Price Step Users can submit more than 1 bid per round Total volume of bids in any round from the same User must be less than or equal to the capacity offered in the auction Bids can be modified or withdrawn up to the close of the relevant bid window Once the bidding round closes, no changes can be made

  17. Auction Invitation

  18. Ascending Clock Bid windows Bid Window

  19. Ascending Clock Auctions – Algorithm (1-to-1) Are aggregate bids <= Offered capacity? 1st round of auction Capacity offered at Reserve price (P0) Auction Closes Allocate in full at the Reserve price YES NO Are aggregate bids = Offered capacity? 2nd and subsequent rounds Capacity offered at Previous Round’s price + Large Price Step Auction Closes Allocate in full at the Offered price (Previous Round’s price + LPS) YES NO Are aggregate bids < Offered capacity? First Time Undersell YES NO

  20. Ascending Clock Auctions – First Time Undersell (1-to-1) Are aggregate bids <= Offered capacity? First Time Undersell (FTU) Capacity offered at Previous completed round Price + Small Price Step Auction Closes Allocate in full at the Offered price (Previous completed round’s price + SPS) YES NO Are aggregate bids <= Offered capacity? 2nd and subsequent rounds Capacity offered at Previous FTU price + Small Price Step Auction Closes Allocate in full at the Offered price (Previous FTU price + SPS) YES NO Iterate round until Offered price is equal to price which led to FTU occurring - SPS Auction will then close at this point, with capacity allocated at price which led to FTU occuring

  21. Auction in Progress example screen - 1

  22. Auction In Progress example screen - 2

  23. Ascending Clock example (1) • The available quantity is 200. • Applicable Price for round 1 is equal to the reserve price • Shipper bids are as follows • The bid demanded in round 1 is 240 • This is greater than the available, so the auction progresses to the next round and the price increments by 1 large price step.

  24. Ascending Clock example (2) • Applicable Price for round 2 is equal to the reserve price + 1 Large Price Step. • Shipper bids are as follows. Note: Rd 2 quantities must be less than or equal to the Rd 1 quantity • The bid demanded in round 2 is 220 • This is greater than the available, so the auction progresses to the next round and the price increments by 1 large price step.

  25. Ascending Clock example (3) • Applicable Price for round 3 is equal to the reserve price + 2 Large Price Step. • Shipper bids are as follows Note: Rd 3 quantities must be less than or equal to the Rd 2 quantity • The bid demanded in round 3 is 190 • This is less than the available for the first time • so the auction progresses to the next round and the price decrements by 1 large price step and increments by 1 small price step.

  26. Ascending Clock example (4) • Applicable Price for round 4 is equal to the reserve price + 1 Large Price Step + 1 small price step. • Shipper bids are as follows Note: Rd 4 quantities must be between Rd 2 and Rd 3 quantities • The bid demanded in round 4 is 208 • This is greater than the available so the auction progresses to the next round by 1 small price step.

  27. Ascending Clock example (5) • Applicable Price for round 5 is equal to the reserve price + 1 Large Price Step + 2 small price steps. • Shipper bids are as follows Note: Rd 5 quantities must be between Rd 3 and Rd 4 quantities. • The bid demanded in round 5 is 196 • This is less than the available, but not for the first time, so the bids for round 5 are allocated in full. • 4 units of capacity remain unsold.

  28. Ascending Clock Auctions – Prices paid The User pays the cleared price for the capacity as determined through the auction algorithm Set at the reserve price plus the relevant auction premium (multiples of the LPS and/or SPS as relevant) If the auction is for unbundled capacity, National Grid NTS invoices the User for the cleared price obtained in the auction If the auction is for bundled capacity, National Grid NTS invoices the User for its share of the cleared price obtained in the auction [Determined by the reserve price plus the relevant multiples of the LPS/SPS]

  29. Uniform Price Auctions

  30. Uniform Price Auctions – overview There is a single bidding round in which Users bid a price as well as a quantity Users can submit up to 10 bids Multiple bids from the same User are treated independently Total volume of bids from the same User must be less than or equal to the capacity offered in the auction Bids can be modified or withdrawn up to the close of the relevant bid window Once the bidding round closes, no changes can be made Only Daily or Within-Daily Capacity is offered

  31. Daily Auction Bid Windows

  32. Uniform Price Auction Invitation (unbundled)

  33. Uniform Price Auction Invitation (bundled)

  34. Uniform Price Auctions – Algorithm (1-to-1) Uniform Price Auction Capacity offered Users bid quantity and price Bids are ranked in price order, highest first Are aggregate bids <= Offered capacity? Auction Closes Allocate in full Users pay clearing price YES • All users pay the clearing price, set as follows: • if demand is less than offered capacity, the clearing price is the reserve price or • if demand is above offered capacity, the clearing price is the price of the lowest successful bid NO Allocate capacity to highest priced bids first up to available capacity Are all the bids allocated in full? Auction Closes Allocate in full Users pay clearing price YES NO Allocate remaining available capacity pro-rated to remaining bids* Auction Closes Some users have been allocated in full, some pro-rated Users pay clearing price * Providing the pro-rated amount is above the Users’ minimum quantity submitted

  35. Uniform Price Example (1) • Available quantity for auction is 400. • 3 Shippers enter 6 bids. • At the end of the auction then all bids are sorted by price. • Bids at the same price create a bid price group

  36. Uniform Price example (2) • Pro-rate 3rd bid group to reduce bid group quantity (230) down to the remaining available capacity for that group (180)

  37. Uniform Price example (3) • So after pro-ration the bid for 80 is reduced to 62.6 and the bid for 150 is reduced to 118.4 • If pro-rated bids > min requested quantity then allocation is complete.

  38. Uniform Price example (4) • If pro-rated bids < min requested quantity then bid is ‘killed’.

  39. Uniform Price example (5) • Bid stack is re-evaluated with any ‘killed’ bid(s) reduced to zero.

  40. Uniform Price Auctions – Prices paid The User pays the cleared price for the capacity as determined through the auction algorithm If the auction is for unbundled capacity, National Grid NTS invoices the User for the cleared price obtained in the auction If the auction is for bundled capacity, National Grid NTS invoices the User for its share of the cleared price obtained in the auction Determined from the National Grid NTS applicable reserve price plus a [50%] share of the auction premium

  41. Post Auction

  42. Post Auction Reporting • Aggregate auction results will be published on the Joint Booking Platform. • Individual auction results will be sent directly from the Joint Booking Platform to Users. • In addition to this: • Auction information will be viewable on Gemini; • Net entitlements will be updated and viewable on Gemini.

  43. View Aggregate Uniform Price Details - 1

  44. View Aggregate Uniform Price Details - 2

  45. Additional Info in case of competition - 1

  46. Additional Info in case of competition - 2

  47. View Aggregate Ascending Clock Details - 1

  48. View Aggregate Ascending Clock Details - 2

  49. TSO Auction ID Deal ID Product Network Point Name Network Point ID Direction of gas flow Market Area Category (bundled/unbundled) Quantity Capacity Period Type of gas Regulated Tariff Surcharge Total (clearing) price Split factor (uniform price) User details (i.e. User who placed bid) Individual Auction Result Info from PRISMA

  50. Post Auction processing by National Grid • Auction results come back from PRISMA. • Allocate bundled results first: • Unsold > Surrenders > LT UIOLI > Oversubscription • Then allocate unbundled results: • Remaining unsold > remaining surrenders > remaining LT UIOLI > remaining oversubscription • This way all unsold must be used before re-allocating surrenders; all surrenders before LT UIOLI; and all LT UIOLI before non-ob. - Bundled bid demand - Unbundled bid demand