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Richard Westoby Director of Energy Demand DCMF January 2010

Richard Westoby Director of Energy Demand DCMF January 2010. Proposal to Amend Obligations Relating to Provision of Information and Changes to Distribution Use of System Charges. SSE’s Concerns:

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Richard Westoby Director of Energy Demand DCMF January 2010

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  1. Richard WestobyDirector of Energy Demand DCMF January 2010

  2. Proposal to Amend Obligations Relating toProvision of Information and Changes to Distribution Use of System Charges • SSE’s Concerns: • Analysis shows there has been considerable volatility in DUoS charges over the period 2004 to 2009. • Volatility has been evident on most networks and virtually all tariff groups. • Almost half of all changes in the domestic sector have been greater than + / -5%. • Changes in the domestic single rate tariff between October ’08 to April ’09 ranged from -3.6% to +20.4%. • Changes in the domestic two rate tariff for the period October ’08 to April ’09 ranged from -24% to +20%.

  3. SSE’s Concerns: • Volatility has also been evident in the non-domestic sector. • Over the period April ’08 to April ’09 changes in the non domestic single rate tariff ranged from -10% to +38% and the two rate tariff ranged from -11% to +26%. • HH LV DUoS charges have increased by up to +68% in previous charging periods. • HH HV DUoS charges have increased by up to +95% in previous charging periods.

  4. SSE’s Concerns • This level of volatility is difficult for Suppliers to forecast. • With just 3 months notice of changes in charges it is very difficult for Suppliers and customers to manage. • Instability prevents any meaningful signal being delivered to Suppliers or customers. • Volatility and uncertainty creates significant risk for Suppliers and has a detrimental impact on competition. • The introduction of the common distribution charging methodology will simplify arrangements for Suppliers and improve transparency but it will not address the issue of volatility.

  5. Proposal • DNOs continue to provide information on recovery positions etc. on a rolling quarterly basis but for Y1, Y2 and Y3 only. • DNOs provide details of potential changes in charges for the forthcoming April and October charging periods at individual tariff level. • DNOs encouraged to give greater notice of changes in charges through a sliding scale capping mechanism: • - where 9 months notice is given there would be no restriction on percentage change in DUoS charges at individual tariff level, • - where 6 months notice is given the % change at individual tariff level would be capped at 10% and • - where 3 months notice is given the % change would be capped at 5%.

  6. Proposal • Where the cap kicks in DNOs would still seek to recover total allowed revenue by allocating under recovered amounts across other tariffs whilst trying to maintain cost reflectivity within the customer group. • “k” factors and interest rates would be amended to give DNOs greater flexibility around under / over recovery positions.

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