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Nigel Williams National Grid Electricity Transmission plc National Grid House Warwick Technology Park Gallows Hill Warwick CV34 6DA

Promoting choice and value for all customers

Direct Dial: 020 7901 7009 Email: [email protected] Date: 25 July 2008

Dear Nigel, Request for extension to period for issuing offer to [an applicant] (the “Applicant”): consent pursuant to standard licence condition C8 (Requirement to offer terms) (“SLC C8”) Background National Grid Electricity Transmission plc (the “Licensee”) holds a licence treated as granted, under section 6(1)(b) of the Electricity Act 1989 to transmit electricity (the “Licence”). Pursuant to paragraph 3 of SLC C8 of the Licence, the Licensee is required, on application made on or after 1 April 2005 (the British Electricity Trading and Transmission Arrangements (“BETTA”) go-live date) by any person, to offer to enter into a bilateral agreement and/or a construction agreement relating to connection or modification to an existing connection. Paragraph 5 of SLC C8 requires the Licensee to offer terms in accordance with paragraph 3 as soon as practicable and (except where the Authority consents to a longer period) not longer than the periods set out in paragraph 7: (a) in the case of persons seeking use of system only, 28 days, and (b) in the case of persons seeking a bilateral connection agreement or a construction agreement, 3 months. Request for consent On 3 July 2008 the Licensee requested that the Authority exercise its powers to consent as provided for in paragraph 5 of SLC C8 to an extension to the period referred to in paragraph 7(b) of SLC C8 in respect of an offer (the “Offer”) that the Licensee is required to make to the Applicant by 23 July 2008. The Licensee requested an extension such that the Offer should be made by 5 September 2008. On 23 July 2008, Ofgem contacted the Licensee and the Applicant to advise that the Authority was continuing to consider the Licensee's request for a consent and that the Authority‟s decision would not be issued before the deadline for making the Offer. We stated that the Authority would direct an alternative date by which the Offer is required to be made when it makes its decision in respect of the requested consent.

The Office of Gas and Electricity Markets 9 Millbank London SW1P 3GE Tel 020 7901 7000 www.ofgem.gov.uk

This letter sets out the Authority‟s decision to grant the requested consent and the reasons for that decision. The Licensee’s views The Licensee advised that it has received a number of applications for connection in the area in which the applicant is seeking a connection. It has stated that these applications represent an unprecedented level of interest to connect in an area of the transmission system which is very limited in terms of its ability to accommodate new generation. As a consequence the Licensee considers that it will require extensive reinforcement including new overhead line and cable circuits and new substations, both locally and to reinforce the wider system. The Licensee has also advised that analysis of the transmission network to determine the optimum connection solutions will be complex due to the unique characteristics of the proposed generation units, the number of units specified within each connection application and the potential scope of reinforcement works. The Licensee considers this will be further complicated by the timing of applications, particularly in respect of the timing for issuing the Offer. The Licensee considers that if the Offer was to be issued by 23 July 2008 as required by SLC C8, this would further complicate preparation of subsequent offers in this area due to the uncertainty of the contracted background against which subsequent applications would be assessed. The Licensee requested the Authority‟s consent to delay issuing the Applicant‟s offer until 5 September 2008. The Licensee has indicated that by this time competent offers can be made to each applicant. The Licensee has advised that in circumstances where offers are interactive, it follows the published process for managing interactive offers. This process was implemented in January 2008 for a six month trial period and arrangements are currently being made for this to be extended to apply for a further six months. The Applicant’s views The Applicant has stated that it recognises that Ofgem grants consents only in exceptional circumstances. It considers that the information provided to it by the Licensee is inadequate for the Applicant to form a view as to whether this is an exceptional circumstance and to assess fully the potential impact of any time extension. The Applicant stated that, in any event, any other application that the Licensee is progressing that may have an impact on the Offer should be dealt with in a manner which maintains the relative „clock start‟ positions of the applications and is consistent with the Licensee‟s obligations to promote competition in generation and not discriminate between users. The Applicant stated that the consent should not be granted if there is an unsigned offer already issued which could impact on the Offer, and no connection offer which could impact the Offer should be issued during the extension period. The Applicant requested that the extension period should be restricted to the minimum necessary, as the Applicant had mobilised resources according to receiving an offer by 23 July 2008. The Applicant also requested that if an interactive situation were to arise, Ofgem should ensure that the Licensee begins engagement with affected parties before offers are formally issued. The Applicant does not consider that the five day period set out in the Licensee‟s interactive process would be sufficient to review and respond to a „customer choice‟ type offer and therefore the Applicant‟s competitive position could be adversely affected.

2 of 5 The Office of Gas and Electricity Markets 9 Millbank London SW1P 3GE Tel 020 7901 7000 Fax 020 7901 7066 www.ofgem.gov.uk

The Authority’s decision The Authority has considered the Licensee‟s request in accordance with its principal objective and general duties and in light of the views of the Licensee and the Applicant. The Authority has decided to consent to an extension of the timescales set out in paragraph 7(b) of SLC C8 within which the Licensee is required to make the Offer such that the Offer is made as soon as is reasonably practicable and in any event no later than 5 September 2008. The Authority notes the views of the Licensee that it has received a number of applications for connection in the area in which the Applicant is seeking to connect, resulting in an unprecedented level of interest to connect in an area that will require extensive reinforcement. The Authority notes that the Licensee considers network analysis is further complicated by the unique characteristics of each of the applications and that issuing the Offer by 23 July would further complicate the preparation of other offers in this area. The Authority also notes that the Applicant considers it has been provided with insufficient information to enable it to fully assess the impact of an extension. The Authority notes that the Licensee discussed the request for an extension with the Applicant, and also notes that the Licensee considered that confidentiality restrictions prevented it from providing any further information to the Applicant. The Authority also notes that the Applicant considers that in taking forward applications that impact on the Offer, the relative „clock start‟ positions should be maintained. From this we understand that the Applicant considers the offers should be made in the order and relative timescales in which they would have been made, with earlier applicants maintaining an advantage over later applicants. The Authority understands that the Licensee will be in a position to make offers to the applicants by 5 September 2008. The Authority understands that the process the Licensee intends to follow should provide applicants with a reasonable opportunity to accept an offer in advance of applicants that applied after them, even where there may be interactivity between offers. The Authority notes there are no unsigned offers that could impact on the Offer, and does not expect the Licensee to make offers that may impact on the Offer prior to issuing the Offer. The Authority notes that the Applicant requests the extension period is restricted to the minimum. The Authority notes that its decision requires the Licensee to make the Offer „as soon as is reasonably practicable‟ and in any event no later than 5 September. The Authority notes that the Applicant does not consider the five day period set out in the Licensee‟s interactive process would be sufficient to review and respond to a „customer choice‟ type offer. The Authority agrees with the Applicant that where an interactive situation arises, the Licensee should engage with affected parties well in advance of offers being issued to ensure that applicants‟ competitive positions are not unduly affected. The Authority also considers that in this particular case and given the complexity of the offers in question, the Licensee should extend the period from five to 15 working days for the Applicant and parties it may be interactive with, to consider their offers before any party can sign. Consent Annex 1 to this letter contains the Authority‟s consent pursuant to paragraph 5 of SLC C8 of the Licence to extend the timescales within which the Licensee is required to issue the Offer to the Applicant. This letter constitutes notice pursuant to section 49A of the Electricity Act 1989 3 of 5 The Office of Gas and Electricity Markets 9 Millbank London SW1P 3GE Tel 020 7901 7000 Fax 020 7901 7066 www.ofgem.gov.uk

Unless the context otherwise requires, words and expressions used in the Licence shall bear the same meaning in this letter and the annex to it. Yours sincerely,

Stuart Cook Director, Transmission Signed on behalf of the Authority and authorised for that purpose

4 of 5 The Office of Gas and Electricity Markets 9 Millbank London SW1P 3GE Tel 020 7901 7000 Fax 020 7901 7066 www.ofgem.gov.uk

Annex 1 Consent pursuant to paragraph 5 of standard licence condition C8 of the licence treated as granted to National Grid Electricity Transmission plc (“the Licensee”) under section 6(1)(b) of the Electricity Act 1989 to transmit electricity (“the Licence”) to the extension of the timescales within which the Licensee must issue an offer under standard licence condition C8 In exercise of the power conferred upon it by paragraph 5 of standard licence condition C8 of the Licence, the Authority hereby grants its consent to the Licensee such that the Licensee shall issue an offer to [the Applicant] in accordance with paragraph 3 of standard licence condition C8 of the Licence as soon as reasonably practicable and in any event no later than 5 September 2008. This Consent shall take effect from 25 July 2008 and shall continue until revoked, amended or replaced by the Authority.

Signed

Stuart Cook 25 July 2008 Director, Transmission Signed on behalf of the Authority and authorised for that purpose

5 of 5 The Office of Gas and Electricity Markets 9 Millbank London SW1P 3GE Tel 020 7901 7000 Fax 020 7901 7066 www.ofgem.gov.uk