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Common Methodology Group Work

Common Methodology Group Work. Workstream 2 (Development of the distribution reinforcement model) Progress since the last DCMF 03 April 2009. Presented by: María Isabel Liendo, SP Energy Networks, on behalf of Workstream 2. Agenda. Progress since the last DCMF:

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Common Methodology Group Work

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  1. Common Methodology Group Work Workstream 2 (Development of the distribution reinforcement model) Progress since the last DCMF 03 April 2009 Presented by: María Isabel Liendo, SP Energy Networks, on behalf of Workstream 2 energynetworks.org

  2. Agenda Progress since the last DCMF: Development of the DRM Cost Allocation model Issues escalated Ofgem Generation benefits (more detail) Next steps 03 April 2009 energynetworks.org 2

  3. DRM/cost allocation model Cost allocation and charges for LV and HV customers. For EHV, accommodate the “phased” implementation of the common methodologies: “Plug in” LRIC or FCP results; Produce EHV charges within the model; Utilise existing EHV charging methodologies Model reflects three main steps of methodology: Data inputs: 500 MW and service models, customer groups, forecasts, etc; Cost allocation to customer types and agreed [common] tariff components; Revenue reconciliation The latest version of the model and user manual can be found on the ENA website at http://2009.energynetworks.org/structure-of-charges/ 03 April 2009 energynetworks.org 3

  4. Issues discussed with Ofgem (1) • Ofgem have been engaged in discussions. This has allowed a satisfactory progression, and in some cases resolution, of issues. • Revenue reconciliation: One “pot” for allowed revenue. • Customer contributed assets: Group proposed a survey approach for excluded assets per customer type. Now investigating data availability. • Replacement of sole use asset charges: Groups considers it necessary to model this explicitly, since allowing the fixed adder to recover these costs would create cross-subsidies between voltage levels. Issue parked until model populated and can assess impacts and materiality. 03 April 2009 energynetworks.org 4

  5. Issues discussed with Ofgem (2) • Reactive charges: Reckon’s proposal based on the average power factors of assets at higher voltage levels, would result on a single charge (no banding). Ofgem suggested that WS2 consults. • Generation benefits: • Network levels: confirmed that only levels above voltage of connection. • Generation credits: agreement to calculate and provide generator credits on a p/KWh basis and not on a capacity basis (see next slide) • Reduction factors: Proposal to allocate costs on a consistent basis to fixed and availability components. Parked until models populated to assess materiality. 03 April 2009 energynetworks.org 5

  6. Generation benefits • Methods for cost allocation in p/kWh and p/kW are equivalent • Tariff in p/kWh is a function of the ratio between the P2/6 F factor and the load factor (not the absolute values). “Divide by one and multiply by the other”. • Benefits in capacity terms require a reasonable estimate of the F factor for each generator type • Comments received from generators that factors are not up to date and their use is limited • Benefits in p/kWh caters for low and high availability generators, and correctly assigns lower or higher benefits based on the actual output (regardless of the F factor) • p/kWh method requires less resources from DNOs in terms of verification of installed capacity 03 April 2009 energynetworks.org 6

  7. Next steps Approach for deriving the data for customer contributions; “Brief” consultation for reactive charges; Model population; Impact assessment and sensitivity analysis in order to resolve outstanding issues; Consultation; Workshop? Methodology Statement and Report (1 September deadline) 03 April 2009 energynetworks.org 7

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