September 2008 QSEC auction - Allocations

Transmission Workstream 04.12.08

2

Introduction

Following November workstream, some Shippers expressed an interest in the 2008 QSEC allocation results

Aggregate results were published 14 November on Gemini, National Grid website and via Joint Office

Now taking the opportunity to run through these results and answer any questions you may have

3

Quick reminder - QSEC bidding

Demand driven price

Auction can close early if stability groups remain unchanged between interim bid windows – difficult to predict when this will happen

This year’s auction closed after interim bid window 2

Price Step (P0) = 90% baseline – minus anything sold in previous auctions + any unsold incremental

Price Steps P1 to P20 = Incremental Capacity offered (Available NTS Entry Capacity)

Incremental prices are based on the long run incremental cost of providing additional capacity above the obligated level

4

Allocations Overview

ASEP Total Allocated

(kWh)

Revenue (£)

Cleared Price Step

Clearing Price

Lowest Price

Highest Price

Avonmouth 219,803,250 20,031 P0 0.0001 0.0001 0.0001

Bacton 5,218,997,441 39,666,749 P0 0.0084 0.0084 0.0084

Barrow 2,179,490,000 13,779,413 P0 0.007 0.007 0.007

Burton Point

100,743,322 9,198 P0 0.0001 0.0001 0.0001

Cheshire 6,524,648,800 595,821 P0 0.0001 0.0001 0.0001

Dynevor 264,524,550 24,109 P0 0.0001 0.0001 0.0001

Hatfield Moor Stor.

259,200,000 655,273 P0 0.0028 0.0028 0.0028

5

Allocations Overview (cont…)

ASEP Total Allocated

(kWh)

Revenue (£)

Cleared Price Step

Clearing Price

Lowest Price

Highest Price

Hole House 6,399,923,044 584,415 P0 0.0001 0.0001 0.0001

Hornsea 19,620,000 159,805 P0 0.009 0.009 0.009

Grain 1,291,200,000 706,444 P0 0.0006 0.0006 0.0006

Partington 219,803,250 20,031 P0 0.001 0.001 0.001

St Fergus 1,691,670,286 58,409,444 P0 0.0378 0.0378 0.0378

Teesside 1,991,246,191 15,090,587 P0 0.0083 0.0083 0.0083

Theddlethorpe 359,579,060 2,692,577 P0 0.0082 0.0082 0.0082

6

Incremental Capacity Release - Caythorpe

Incremental signal received for 90 GWh

Obligated incremental until Dec 2015

Obligated Incremental allocated at price step P6 = 0.0094 p/kwh

After 5 years Obligated Incremental then becomes baseline

April 2020 to December 2024 allocated at P0 (along with some individual quarters earlier on in the transaction period)

Total revenue received = £19,305,720

7

Non Obligated Incremental Capacity Release - Easington

Allocations made of both Baseline and non obligated capacity

Aggregate Volume of Capacity sold 1,284,329,102 kWh

Total Revenue received - £11,297,469

Baseline Capacity Sold

1,060,599,012 kWh

Revenue - £8,984,488

Incremental signal received for some quarters :

Where NPV test not passed, National Grid can choose to release non obligated incremental inline with UNC section B2.6 (a) (iii)

National Grid released non-obligated incremental capacity at Easington in Q1 2011, Q1 2012, Q1 2013, Q1 2014 and Q1 2015

Total sold - 223,730,079 kWh

Revenue - £2,312,981

8

Conclusion

Currently the next QSEC auction should be held, in accordance with Code, in September 2009

2 UNC modification have been raised on Auction timing:

Modification Proposal 0230 is seeking to change this so that the next QSEC auction would be held in March 2010

Modification Proposal 230A seeks to maintain existing September QSEC Auction in September 2009 prior to transition to a March 2010 Auction

Full guide to the QSEC auction is available on National Grid’s website with contact details for the Capacity Auctions team and also for independent consultants, should you wish to obtain advice on bidding strategies

All of the information in today’s presentation is taken from the aggregate QSEC results published on National Grid’s website http://www.nationalgrid.com/uk/Gas/Data/CA/reports/Long+Term+System+Entry+Capacity+%28LTSEC%29.htm

ANY QUESTIONS?