Ms. Rae McQuade

Mr. Jonathan Booe

August 18, 2014

Page 2 of 7

established certain ground rules, including a process for determining if an "industry consensus position" could be reached. It was agreed, and all parties were put on notice, that super majority, balanced voting by industry segments would be employed to determine if an "industry consensus position" had been met. Under this process, each segment, despite the number of entities participating, would be given an equal voice in the process. In addition, in order to reach the super majority condition and establish an industry consensus position, a proposal would have to obtain favorable votes from 67% of both the Wholesale Gas Quadrant and the Wholesale Electric Quadrant, as well as 40% of the votes from each segment.

During the months of April, May and June, public forum meetings were conducted allowing industry representatives to participate in person or via conference call. This forum was productive in that it provided a comprehensive opportunity for interested parties to educate other segments and regions on the operational and physical challenges facing the natural gas and electric industries. However, as discussions progressed one point that was made clear by virtually all segments of the gas and electric industries was the concern that the individual components of a comprehensive industry consensus position (such as the time for the start of the Gas Day, the hours of flow for each cycle and the appropriate scheduling of the different timelines during the remaining hours of the day) were so inherently tied together that it would be impossible to vote on individual component in isolation. In response to this concern, it was explained that binding votes would only apply to complete packages that addressed all of the components of a proposal. Based on this representation, discussions on individual components of proposals (including their interplay with crucial elements of a package) where readily discussed and made the subject of only non-binding votes with the confidence that any industry consensus position would ultimately require binding votes in the form of a "complete package."

Unfortunately, despite eight weeks of public forum discussions, the industries failed to meet the agreed upon requisite of the super majority voting percentage needed to reach an "industry consensus position."

On June 4, 2014, the NAESB Board of Directors reviewed the voting results from the public forum. Instead of responding to the Commission that a comprehensive industry consensus position could not be reached, the Board unilaterally decided to lower the threshold for establishing a "consensus position" from the "super majority" vote on a package deal threshold announced at the public forum to one that only required "broad industry support" of individual elements of different proposals and directed the Executive Committee to:

[W]rite standards to reflect the timely and evening next day nomination cycles, and the 3 intraday nomination cycles as described in the last motions of the NAESB GEH Forum, remaining silent on the start of the Gas Day with the assumption the Commission will establish the gas day start best suited to achieve the objectives defined in the NOPR.

As a result of the Board action, the Wholesale Gas Quadrant Business Practice Subcommittee ("BPS") conducted meetings and has completed the assigned