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Addressing Existing Force Majeure Capacity Shortfalls in Corsican Gas Planning

The Corsican natural gas situation faces a significant capacity shortfall of up to 200 GWh/d due to the rejection of a planning application for a Priority Infrastructure project in the Tirley area. Following a second public inquiry in July 2010, a decision is awaited from the Secretary of State. The proposed modification aims to create a Force Majeure Option contract to manage capacity impacts, with National Grid bearing 50% of the costs and shippers the other half. This urgency emphasizes the need for discussions and a generic solution for NTS entry capacity affected by these challenges.

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Addressing Existing Force Majeure Capacity Shortfalls in Corsican Gas Planning

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  1. Force Majeure • Existing FM situation:Up to 200GWh/d capacity shortfall due to the rejection of NG’s planning application for a PRI in Corse / Tirley area. Second Public Enquiry held July 2010 and awaiting Sec of State decision (DECC / C&LG joint decision). • Mod 262 - rejected in Dec 2009 • Lack of risk to NG revenue seems inappropriate • Transfers risk to consumers • Incentive on shippers to challenge FM • Whether FM terms in UNC are comparable with other normal commercial terms? • Way forward – Mod to November 2010 Mod Panel • Goes some way to addressing the first three points above • FM terms addressed under RIIO-T1

  2. Proposed Modification • Generic solution for treatment of NTS Entry Capacity affected by FM, not geared to specific situation • Urgent – how to solve this? • Urgency due to materiality BUT benefit from discussion? • Key elements of Mod: • Creation of an “FM” Option contract to manage the capacity impact of FM • NG bear 50% of the cost via the Buyback incentive • Shippers bear 50% of the cost via Capacity Neutrality and Commodity • Option is daily exercisable with zero exercise price • Option premium paid to Registered User = rebate affected capacity based on WAP of each Registered User @ ASEP * Constrained capacity of User (pro-rated) • Applies to QSEC / AMSEC capacity at the time the FM was declared (prevents “gaming”)

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