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Pricing Consultation Paper DNPC 01 Customer Charge Structure for the 0-73MWh Load Band

Pricing Consultation Paper DNPC 01 Customer Charge Structure for the 0-73MWh Load Band. Presentation on behalf of all DNs Lorraine Goodall - SGN. The Proposal. Change customer charge for 0-73MWh load band to capacity based Target Implementation date 1 April 07. Reasons for Proposal.

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Pricing Consultation Paper DNPC 01 Customer Charge Structure for the 0-73MWh Load Band

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  1. Pricing Consultation Paper DNPC 01Customer Charge Structure for the 0-73MWh Load Band • Presentation on behalf of all DNs • Lorraine Goodall - SGN

  2. The Proposal • Change customer charge for 0-73MWh load band to capacity based • Target Implementation date 1 April 07

  3. Reasons for Proposal • Improve cost reflectivity • Facilitate competition • Improve consistency

  4. Improve Cost Reflectivity • Costs reflected in the customer charges are: - Service pipe costs - Supply point emergency service costs These costs do not vary with throughput

  5. Facilitate Competition • Remove source of instability - Revenue sensitivity to volume - Change equalises sensitivity - No longer k variations due to weather

  6. Pricing The impact of volume variation on K Collectable £ revenue 65% gradient 35% gradient K over-recovery Allowed Income gained Income lost K under-recovery Warm/reduction 0 Cold/increase (Budgeteddemand)

  7. Price Control Review • Core Allowed Revenue fixed • Greater k variability

  8. Price Control Review The impact of volume variation on K 65% gradient £ revenue Collectable 0% gradient K over-recovery Proposed Collected Allowed K under-recovery Warm/reduction 0 Cold/increase (Budgeteddemand)

  9. Description of change • Remove existing 0-73MWh customer charge • New charge based on supply point SOQ • Ensure forecast revenue recovery neutral

  10. Implementation • Target date 1 April 2007 - Stable revenue flow from capacity charges - Seasonal revenue flow from commodity charges - Change required for formula year

  11. Summary - Reasons for Proposal • Improve cost reflectivity • Facilitate competition • Improve consistency

  12. Responses • Responses required by 30 October 2006

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