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Why does OTEG need a charging subgroup?

OTEG Open Meeting 3 July 2006. Why does OTEG need a charging subgroup?. Why does OTEG need a charging subgroup?. What are TNUoS charges? Price controlled revenue and TNUoS charges How are TNUoS charges currently set? The TNUoS charging methodology Why is a charging subgroup required?

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Why does OTEG need a charging subgroup?

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  1. OTEG Open Meeting 3 July 2006 Why does OTEG need a charging subgroup?

  2. Why does OTEG need a charging subgroup? • What are TNUoS charges? • Price controlled revenue and TNUoS charges • How are TNUoS charges currently set? • The TNUoS charging methodology • Why is a charging subgroup required? • Work needed to extend the current methodology into the offshore • Proposal

  3. Price controlled revenue and TNUoS charges Transmission Licensees • NGET • SHETL • SPT Price controlled revenue GBSO Users of the transmission system • Generation • Demand TNUoS charges

  4. Price controlled revenue • An allowed revenue is set for each transmission licensee at the price control • Revenue set to recover the cost of installing, operating and maintaining the transmission system • The transmission licensees’ charges – equal to the allowed revenue – are paid by the GBSO • The GBSO recovers the transmission licensees’ charges from users through TNUoS charges

  5. TNUoS charges • TNUoS charges should, as far as practicable, recover the allowed revenue • The GBSO charges users of the transmission system • Develop and apply a use of system charging methodology • Approved by Ofgem • To be kept under continuous review • Charges are for generation or demand use of system and vary by location

  6. Current TNUoS charging methodology (1) • Separate charges for generation and demand (from 27:73 split of revenue) • Two elements (£/kW): • Locational charge • Non-locational charge (or residual) • Locational charge from DC loadflow investment cost related pricing (DCLF ICRP) transport model

  7. Current TNUoS charging methodology (2) • DCLF ICRP transport model assesses the marginal cost of investment in the transmission system as a result of an increase in generation or demand • Model takes as the starting point an onshore system comprising secure 400 kV overhead line • Adjustments for 132/275 kV line, potential line upgrades, cable, “non-firm” connections…

  8. TNUoS charges offshore: Why a charging subgroup is required (1) • Indicative charges are an important element when obtaining project financing • Current charging methodology is complex, and the model parameters are not suited to offshore systems. For example: • Assumes double-circuit connection (GB SQSS compliant) • No adjustments for AC or HVDC submarine cables • Cannot accommodate “modular” offshore infrastructure • Shorter asset life of offshore infrastructure will result in higher annual revenue requirement

  9. TNUoS charges offshore: Why a charging subgroup is required (2) • Changes to the charging methodology are time consuming to develop, consult on, notify and implement • Will change onshore TNUoS charges (and zones?) • Number of options – must be cost-reflective and non-discriminatory • Charges will be required for adopted assets

  10. Proposal • Charging subgroup established • Possibly as subgroup of the Charging Issues Standing Group (CISG) • CISG already considering changes to charging methodology to accommodate “non-firm” connections, e.g. island links • Date for publication of draft methodology and indicative tariffs to be added to OTEG timetable

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