Code Modification Forum Ashling Hotel Dublin Wednesday 2

Code Modification Forum Ashling Hotel, Dublin Wednesday, 2 May 2018

Agenda (1 of 2) 1. Review of minutes from last meeting 2. Review of Action Items from last meeting 3. General Items Update 4. GNI Scheduled Maintenance Update 5. Intra-day Nomination Patterns and Profiles / Cod Mod Proposal A 086 -Incentives for Intra-day Balancing 6. Code Modification Proposal A 087 - Implementing a new framework for Suppliers to contract their payment channels for PPM customers 7. Code Modification Proposal A 090 - Proposed new Invoice Dispute Procedure 2

Agenda (2 of 3) 8. Code Modification Proposal A 091 -Modification of oxygen content limits for Renewable Natural Gas (RNG) injected from RNG Entry Points 9. GNI Trading Platform Business Rules /Timelines of review and consultation process on potential amendments to cashout prices and tolerances after commencement of trading on platform 10. Trading Platform Transactions Agreement 11. Gas /Electricity Interaction interaction 12. Brexit and ROI Gas Market 13. Transparency Data Update 14. AOB 3 Next Code Modification Forum Meeting

1. 4 Review of minutes from last meeting

2. 5 Review of Action Items from last meeting

Code Modification Forum – Open Actions (Slide 1 of 2) ID Action C 530 Release revised Version 5. 02 of the Code of Operations which reflects any outstanding Code Modifications approved by the CER subsequent to the 1 St October 2015 6 Transporter High Transporter Open Medium Transporter to upload unto Website all live Code Modification Proposals Transporter Propose to close High Transporter to proceed to answer all individual Industry Submissions with a Modified TPTA and circulate to CMF Mailing List the modified TPTA with summary of Submissions and Transporter responses Transporter to circulate to the CMF Mailing List a work document in relation to Website Transporter Propose to close High Transporter Open High Transporter to continue consultation process surrounding intra-day nomination patterns and profiles C 5 Transporter to proceed to formulate and circulate to the CMF List a questionnaire in relation to post Trading Platform reference price levels/default rules /liquidity criteria/tolerances C 548 C 558 Transporter Status Priority Propose to High close Open C 538 C 559 Responsibility

Code Modification Forum 3. 7 General Items Update

Code of Operations 5. 02 • Version 5. 02 has been released , to reflect: ‒ Code Mods A 071, A 079, A 080, A 081, A 082 A 088 and A 089 (all of which have been approved by the CRU). https: //www. gasnetworks. ie/corporate/gas-regulation/service-for-suppliers/code-of-operations/ 8

Code Modification Forum 4. 9 GNI Scheduled Maintenance Update

Network Maintenance Update 1. Upstream Operator Maintenance GNI have been advised of the following scheduled Maintenance Upstream of Entry Points: Location Nature of Works NOTHING TO REPORT 10 Planned Timings (Subject to change) Duration (days) Entry/Exit Points Affected Impact on flows at entry/exit points affected

2017/ 2018 GNI Proposed Maintenance Days Maintenance Programme Gas Year 2017/2018 Date 7 th Feb 2018 31 May-1 June 9 May 4 th Jul 2018 12 th Sep 2018 11 Duration Entry Points 1 day Corrib Not required 1 day Inch Not required 1 day Corrib 1 day Inch Not scoped yet 1 day Corrib Not scoped yet 1 day Inch Not scoped yet Commentary SCADA signal validation testing In-Line Inspection (ILI) run between Inch, Lochcarrig Lodge and Caherlag. Date to be finalised with pigging contractor/Odorant tank refill at Inch. Zero flow whilst this takes place. Fuel gas skid connection at Cappagh South. May not affect flow Note: Dates and maintenance programme may be subject to change

2018/ 2019 Maintenance Days Maintenance Programme Gas Year 2018/2019 Date Duration Entry Points 8 th November 2018 1 Inch 7 th March 2019 1 Bellanaboy 9 th May 2019 1 Inch 4 th Jul 2019 1 Moffat 12 th Sep 2019 1 Bellanaboy 12 Commentary Deferred in line inspection. Risk to flow during intelligent pigging run Station testing, valve check and validations at Cappagh South. Odourant injection system planned maintenance Station testing, valve checks and validations at Beattock and Brighouse Bay compressor station ESD testing at the Corrib Terminal

IT Maintenance Update Nature of Works Planned Timings (Subject to change) Nothing to report Please note the above works/timings/duration are subject to change 13 Duration (days) Systems Affected

Code Modification Forum 5. Intra-day Nomination Patterns and Profiles /Code Mod Proposal A 086 –Incentives for intra-day Balancing 14

Outline of proposed GNI Modification A 086 • Modification Raised by GNI to address concerns that the aggregate system imbalance intra-day is creating operational difficulties. • At times, there are large deviations between the prevailing exit nominations on the system and the prevailing entry nominations. GNI wish to introduce an incentive to encourage more alignment of entry and exit • PROPOSAL: At check points during the gas day (11: 00, 17: 00, 23: 00) a shippers portfolio Nomination Imbalance position will be recorded. • A tolerance will be applied at each point • Worked Example: A shipper has 24 units of Aggregate Exit Nomination at 11: 00. ‒ Deemed flow at Exit = (24 units * 6 hrs/24 hrs) = 6 units ‒ Total Entry Nomination = 4 units ‒ Apply a [10%] tolerance: Adjusted Nomination Imbalance Position § Nomination Imbalance Position = (6 * 90 %) – 4 = 1. 4 units ‒ The Adjusted Nomination Imbalance Position at the 3 time checks will be added 15‒ The total for the day will be multiplied by [SAP] * [x%] ‒ The amounts for each day in a month will be invoiced at month end.

Impact if Code Mod was applied in November 2017 –March 2018 • Assume 10% Exit Tolerance and charging of 5% of SAP • November 2017 ‒ 8 shippers would have received charges ranging from € 365 to € 148 k ‒ Total charges: € 334 k ‒ 92% of charges attributable to 3 shippers • December 2017 ‒ 5 shippers would have received charges ranging from € 17 to € 124 k ‒ Total charges: € 162 k ‒ 96% of charges attributable to the same 3 shippers • January 2018 ‒ 5 shippers would have received charges ranging from € 18 to € 30 k ‒ Total charges: € 67 k ‒ 96% of charges attributable to 3 shippers 16

Impact if Code Mod was applied in November 2017 –March 2018 • February 2018 ‒ 7 shippers would have received charges ranging from € 15. 20 to € 72 k ‒ Total charges: € 116 k ‒ 93% of charges attributable to 3 shippers • March 2018 ‒ 6 Shippers would have received charges ranging from € 86 to € 149 k ‒ Total charges: € 252 k ‒ 96% of charges attributable to 3 shippers 17

Impact if Code Mod was applied in November 2017 –March 2018 • There was a marked improvement in Shipper Nominations following discussions of the proposed modification at recent code mod forums. The estimated monthly financial impact dropped from € 334 k (November) to € 67 k (January). • However, during February and March late day nominations have resulted in almost hourly batches late in the gas day, causing operational difficulties once again for both GNI and National Grid- see next Slide for more details 18

Impact if Code Mod was applied in November 2017 –March 2018 Financial Impact if Code Mod was applied November 2017 – March 2018 400000 350000 NOVEMBER, € 334, 187. 70 300000 MARCH, € 252, 503. 70 250000 200000 Total DECEMBER, € 161, 895. 41 150000 FEBRUARY, € 115, 850. 34 100000 JANUARY, € 67, 255. 77 50000 0 NOVEMBER 19 DECEMBER JANUARY FEBRUARY MARCH

Code Modification Forum 6. Code Modification Proposal A 087 -, Implementing a new framework for Suppliers to contract their own payment channels for PPM customers 20

Code Mod 87 – Front Office PAYG Contracts • Recap of Code Modification: ‒ Raised by GNI, this modification seeks to revise the provisions in the Code of Operations related to Prepayment Metering so that Suppliers contract their own payment channels for gas prepayment meter customers rather than be required to be a party to a Front Office Services agreement agreed by the Transporter with third party service providers. • Status of Code Modification: ‒ This code modification is fundamentally a retail issue and it has been agreed that it should be further discussed at the retail (GMARG) forum 21

Code Modification Forum 7. New Code Modification Proposal A 090 Proposal from BGE for New Invoice Dispute Resolution Procedure 22

Code Modification Forum 8. New Code Modification Proposal A 091 Modification of oxygen content limits for Renewable Natural Gas (RNG) injected from RNG Entry Points 23

Code Mod A 091: Overview • Proposal: ‒ Increase the current oxygen limit of ≤ 0. 2 mol% to ≤ 1 mol% § Applicable to biomethane entry points and to exit points only ‒ All other gas specification parameters will apply at these points ‒ Relevant entry points will be subject to continuous monitoring of both dew point and oxygen content • Rationale: ‒ Some biomethane sources will not be able to meet the current oxygen limit • Benefits ‒ Modification will enable biomethane producers to meet GNI’s quality specifications ‒ Biomethane production is to be encouraged as it supports, inter alia, the reduction of carbon footprint of the gas network and the reduction of carbon emissions, thereby helping to future proof the gas network in Ireland ‒ Status ‒ Code Modification to be progressed subject to CRU approval of PENSPEN Report 24

Code Modifications - Live Number Title of Proposal Proposer Status A 085 Profiling of Gas Flows at Entry Points IOOA Live A 086 Intra-day Nomination Incentive Proposal GNI Not yet issued A 087 New Framework for Suppliers in PPM Market GNI Live A 090 Proposed new Invoice Dispute Resolution Procedure BGES Live A 091 Modification of oxygen content limits for Renewable Natural Gas (RNG) injected from RNG Entry Points GNI Live 25

Code Modification Forum 9. GNI Trading Platform Business Rules / Timelines of review and consultation process on potential amendments to cashout prices and tolerances after commencement of trading on platform 26

GNI Trading Platform/Timelines of review and consultation process on potential amendments to cashout prices and tolerances after commencement of trading on platform • GNI will be transitioning to using the EBI Trading Platform for Balancing Actions during May/June 2018. As trading at the Irish Balancing Point (“IBP”) develops GNI intends to begin using the IBP traded prices as the basis for cashing out Shipper imbalances under the Code of Operations. The relevant Articles of the BAL NC are Art. 22 and Art. 23. • Following the most recent Code Mod Forum (7 th March) GNI circulated: ‒ Proposed First Tier and Second Tier Imbalance Cash-out Prices ‒ A questionnaire seeking the views of Industry stakeholders with regard to the outstanding issues with respect to implementation of the EU Network Code on Gas Balancing of Transmission Networks (EC 312/2014) (“BAL NC”). • It was requested that responses be returned by April 20 th. • GNI received 2 responses. 27

Proposed First Tier Imbalance Cash-out Prices to apply in different scenarios Scenario First Tier Imbalance Cash-out Sell First Tier Imbalance Cash-out Buy Price to apply to Shippers’ Long to Apply to Shippers’ Short Positions A. GNI has no balancing (buy or sell) requirements, but there are trades on an IBP Trading Platform SAP (IBP) plus 2% differential B. GNI has no balancing requirements, and there are no trades on an IBP SAP (NBP) plus] 2% differential Trading Platform (Default Rule) C 1. GNI has balancing buy requirements, and it has to utilise the balancing services contract, and other parties trades with each other on an IBP Trading Platform SAP (IBP) plus 2% differential C 2. GNI has balancing buy requirements, and has to utilise the balancing SAP (NBP) plus 2% differential services contract, and there are no trades on an IBP Trading Platform (Default Rule) D 1. GNI has balancing sell requirements, and it has to utilise the balancing services contract, and other parties trades with each other on an IBP Trading Platform 28 SAP (IBP) plus 2%differential SAP (IBP) minus 2% SAP (NBP) minus 2% differential (Default Rule) SAP (IBP) minus 2% differential SAP (NBP) minus 2% differential (as per Default Rule - see Section 3. 2. 8) SAP (IBP) minus 2%differential D 2. GNI has balancing sell requirements, and has to utilise the balancing services contract, and there are no trades on an IBP Trading Platform SAP (NBP) plus 2%differential SAP (NBP) minus 2% differential (Default Rule) E. GNI has balancing buy requirements, and trades these out on an IBP Trading Platform SAP (IBP) plus 2% differential F. GNI has balancing sell requirements, and trades these out on an IBP Trading Platform SAP (IBP) plus 2% differential SAP (IBP) minus 2% differential

Proposed Second Tier Imbalance Cash-out Prices to apply in different scenarios Scenario Second Tier Imbalance Cash-out Buy Price to Apply to Shippers’ Short Positions A. GNI has no balancing (buy or sell) requirements, but there are trades SMPbuy (IBP), which is the equivalent of on an IBP Trading Platform SAP (IBP) + 10% Differential SMP (NBP) plus 10% differential plus B. GNI has no balancing requirements, and there are no trades on an IBP Transportation Costs Trading Platform (Default Rule) C 1. GNI has balancing buy requirements, and it has to utilise the balancing services contract, and other parties trades with each other on an IBP Trading Platform SMPsell (IBP) which is the equivalent of SAP (IBP) - 10% Differential SMP (NBP) minus 10% differential minus Transportation Costs (Default Rule) SMPsell (IBP) which is the equivalent of SAP (IBP) - 10% Differential SMP (NBP) plus 10% differential plus C 2. GNI has balancing buy requirements, and has to utilise the balancing Transportation Costs services contract, and there are no trades on an IBP Trading Platform (Default Rule) SMP (IBP) which is the equivalent of SAP D 1. GNI has balancing sell requirements, and it has to utilise the balancing services contract, and other parties trades with each other on (IBP) + 10% Differential an IBP Trading Platform SMP (NBP) minus 10% differential minus Transportation Costs SMP (NBP) plus 10% differential plus D 2. GNI has balancing sell requirements, and has to utilise the balancing Transportation Costs services contract, and there are no trades on an IBP Trading Platform (Default Rule) SMP (NBP) minus 10% differential minus Transportation Costs E. GNI has balancing buy requirements, and trades these out on an IBP Trading Platform 29 SMPbuy (IBP) which is the equivalent of SAP (IBP) + 10% Differential Second Tier Imbalance Cash-out Sell Price to apply to Shippers’ Long Positions F. GNI has balancing sell requirements, and trades these out on an IBP Trading Platform IBP Marginal Buy Price Greater of SMPbuy (IBP) and SAP (IBP) plus 10% differential (Default Rule) SMP (IBP) which is the equivalent of SAP (IBP) - 10% Differential (Default Rule) IBP Marginal Sell Price Lesser of SMPsell (IBP) and SAP (IBP) minus 10% differential

Industry Responses to Questionnaire QUESTION RESPONSE Q 1: What are industry views as the level of the “small • adjustment” that should apply? – Article 21. 7 specifies that the maximum should be 10% First response considered that the cash-out differentials should be set at level of small adjustment. This response proposes that if initially tolerances remain then it may be to set the differential at 5%, as the Irish system has a history of operating with its second tier imbalance differential at this level. If tolerances are removed, the response recommend that the imbalance differential should be reduced to a lower level. • The second response contends that the “small adjustment” should not automatically default to the maximum 10% stated in the BAL regulation. Justification for this would be required; 10% appears to be more material than a small adjustment. 2% to 5% would appears to be more appropriate 30

Industry Responses to Questionnaire QUESTION RESPONSE Q 2: Should the “small adjustment” be symmetrical for positive and negative imbalances? • The first response contends that imbalance differentials should be kept symmetrical so as to not hinder trading liquidity at the IBP. • The second response – anything other than symmetrical would be unnecessarily complex • The first response suggests that two trades a day by a minimum of three counterparties, should be sufficient liquidity to determine IBP SAP and suggests that 50, 000 k/therms as a minimum requirement for total traded volume Q 3: What number of trades and/or volume of trades on a Gas Day constitutes a sufficient level of liquidity to allow the IBP prices to be used as system cashout prices? 31

Industry Responses to Questionnaire QUESTION RESPONSE Q 3: What number of trades and/or volume of trades on a Gas Day constitutes a sufficient level of liquidity to allow the IBP prices to be used as system cashout prices? • Second response- questions whethere is a market standard that can be applied, for example as recommended under REMIT, by ACER or used widely by other markets. Any views expressed by CRU in other cases in this context should be taken into consideration (including those in other regulated industries under its remit). • Queries whether setting a threshold based on figures is appropriate, as it may have unintended consequences, e. g. set an artificial target for players, or encourage certain behaviours. Consistency in activity levels over time should be taken into account prior to the setting of any thresholds. • Argues that it may be more appropriate to make an assessment of the legitimacy of trading on the day from a qualitative rather than quantitative perspective, or in addition to any target for numbers. There is generally a strong correlation between the IBP and NBP price. The NBP is widely regarded as a liquid market, and it is pragmatic to use this reference in the absence of depth at the IBP 32

Industry Responses to Questionnaire QUESTION RESPONSE Q 4: If the only transaction(s) on a Gas Day on the EBI Trading Platform involve GNI as a counterparty to that transaction, should the IBP SAP/SMP prices always be derived from those GNI transaction(s)? • First Response - If GNI completes one trade on a given day this should be used to determine SMP, but perhaps not IBP SAP • Second Response - We are open for Second Tier imbalances being reflective of GNI buys/sells, but not First Tier. It has been mentioned in the past that GNI operators are not experienced traders, therefore there is potential for inefficient trades to be concluded with counterparties (buy too high, sell too low). • First response- consider that the same adjustments should apply to the UK derived prices as to IBP derived prices. • Second Response – Yes to avoid unneeded complexity Q 5: Should the “small adjustments” per Q 1 and Q 2 apply to the UK derived prices? If not, what adjustments should apply? 33

Industry Responses to Questionnaire : IOOA QUESTION RESPONSE Q 6: Should Transportation Charges at Moffat be taken into account for the purposes of adjusting the UK prices? If yes, how should this be done? • First Response- support the removal of applying Transportation Charges to a shipper purchasing gas at the Cash-Out Sell Price, as this is double charging the shipper and request further discussion of Capacity costs at the next balancing workshop. • Second Response- would like clarification on the transportation charges under consideration. There should be no double charging. • First Response-Removal of tolerances will reduce the level of imbalances and increase liquidity at the IBP. • Second Response-Yes, on the basis of 50. 1 (c): tolerances may only be applied in case network users do not have access to sufficient information regarding their inputs and offtakes. The grounds for this are: Q 7: Do you believe that tolerances should continue to apply to any of the Entry/Exit point categories in Sections 1. 7 of Part E of the Code of operations and at what level? 34 - Power stations are not in control of their gas offtakes, as they are dispatched by Eirgrid in real time, given indicatives as to the gas take. - NDM allocations are only finalised after the trading day ends.

Next Steps - Tolerances • The BAL NC envisages the removal of tolerance ‒ Interim measures allows the retention until 2019 ‒ GNI believes, following recent consultation, that it is now time to move towards removal ‒ The table below outlines a 2 step approach to removal of tolerances at LDM, DM. ‒ Corrib and Inch Entry point Tolerances proposed to move to 0. 75% on the 1 st of August 2018 and 0% on the 1 st of October 2018 Sector/Size(Annual Exit Tolerance % - CURRENT 3. 5 Proposed % – 01 August Proposed % – 01 October 1. 75 0 9 4. 5 0 19 9. 5 0 30 of DM Exit Allocations 15 0 2. 5 of NDM Exit Allocations 2. 5 Inch Storage Exit Point 1. 5 0 IP CSEP Non OBA Day 1. 5 0 IP CSEP OBA Day 0 0 0 Sub-Sea I/C > 1, 500, 000 k. Wh Sub-Sea I/C > 260, 000 to 1, 500, 000 k. Wh Sub-Sea I/C < 3. 5 1. 75 0 9 4. 5 0 19 9. 5 0 Quantity) LDM >1, 500, 000 k. Wh (LDM 1) LDM > 260, 000 to 1, 500, 000 k. Wh (LDM 2) LDM >57, 500, 000 to 260, 000 k. Wh (LDM 3) DM NDM 35

Code Modification Forum 10. Trading Platform Transactions Agreement 36

Code Modification Forum 11. Gas / Electricity Interaction 37

Code Modification Forum 12. Br. Exit and ROI Gas Market 38

Brexit – In The News 39 Draft Withdrawal Agreement published in March 2018 including an agreement on a transition period to last until the end of 2020 Important to point out that ‘nothing is agreed until everything is agreed’ – GNI are therefore continuing to consider Brexit as if there was no transition period agreed

Code Modification Forum 13. Transparency Data Update 40

1. Next Meeting Upcoming Code Modification Forum Meetings CMF Dates 2018 Location 7 th March 2018 (Wednesday) Cork 2 nd May 2018 (Wednesday) Dublin 13 th June 2018 (Wednesday) Cork 8 th August 2018 (Wednesday) Dublin 26 th September 2018 (Wednesday) 28 th November 2018 (Wednesday) 41 Cork Dublin

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