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03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM A PRESENTATION BY THE REGULATION GROUP OF THE ENERGY NETWORK ASSOCIATION PRESENTED BY TONY McENTEE & NEIL FITZSIMMONS

03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

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Page 1: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

03 April 2009 energynetworks.org •1

Common Methodology Group Work

Presentation from Workstream 4

Review of the ConnectionCharging Boundary in the CDCM

A PRESENTATION BY THE REGULATION GROUP OF THE ENERGY NETWORK ASSOCIATION

PRESENTED BY TONY McENTEE & NEIL FITZSIMMONS

Page 2: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

03 April 2009 energynetworks.org •2

WS 4 – Work to Date

• Key focus on harmonising approach across DNOs• Baseline methodology

• Identified Other Options for Change• Option 1 – Revised Boundary for Sharing Costs;

• Option 2a – Revised CAF: Total Approach;

• Option 2b – Revised CAF: Incremental Approach;

• Option 2c – Revised CAF: Incremental Approach with Headroom;

• Option 3 – Allowance for Deferment of Asset Replacement;

• To issue a consultation on way forward

Page 3: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

03 April 2009 energynetworks.org •3

Baseline Methodology

• Produced common set of words for Connection Charging Methodology

• Greater clarity and consistency in application across DNOs• Areas covered

• Minimum Scheme• Cost Allocation

• Costs to be paid in full by the distributor;

• Costs to be paid in full by the customer;

• Costs to be apportioned between the customer and the distributor; and

• Recovery of costs for previous Reinforcement

• Recovered Equipment and Deferment of Asset Replacement

• Electricity (Connection Charges) Regulations 2002 (ECCR)

• Speculative Developments

Page 4: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

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Option 1 – Revised Boundary for Sharing Costs;

• Baseline• The costs of Sole Use Assets and Extension Assets are to be

charged in full to the customer. • The costs of Reinforcement are to be apportioned between the

customer and the distributor.• Option

• The costs of Sole Use Assets are to be charged in full to the customer.

• The costs of Extension Assets and Reinforcement are to be apportioned between the customer and the distributor.

Page 5: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

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Option 2a – Revised CAF: Total Approach

• Baseline

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the incremental capacity.

• New Network Capacity: the secure capacity following Reinforcement of the assets.

• Option

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the total capacity following the increase.

• New Network Capacity: the secure capacity following Reinforcement of the assets.

Same approach for Fault Level CAF – x3 in Baseline and in Option

(%) 100Capacity Network New

Capacity RequiredCAF Security

(%) 100Capacity Network New

Capacity RequiredCAF Security

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Option 2b – Revised CAF: Incremental Approach;

• Baseline

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the incremental capacity.

• New Network Capacity: the secure capacity following Reinforcement of the assets.

• Option

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the incremental capacity.

• New Network Capacity: the increase in secure capacity following Reinforcement of the assets.

Same approach for Fault Level CAF – x3 in Baseline and No x3 in Option

(%) 100Capacity Network New

Capacity RequiredCAF Security

(%) 100Capacity Network New

Capacity RequiredCAF Security

Page 7: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

03 April 2009 energynetworks.org •7

Option 2c – Revised CAF: Incremental Approach with Headroom;

• Baseline

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the incremental capacity.

• New Network Capacity: the secure capacity following Reinforcement of the assets.

• Option

• Required Capacity: the design capacity of the connection, agreed with the customer. For customers requiring increases in capacity this is defined as the incremental capacity.

• New Network Capacity: the increase in secure capacity following Reinforcement of the assets.

Same approach for Fault Level CAF – x3 in Baseline and No x3 in Option

(%) 100Capacity Network New

Capacity RequiredCAF Security

100Capacity Network New

Headroom - Capacity RequiredCAF Security

Page 8: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

03 April 2009 energynetworks.org •8

Option 3 – Allowance for Deferment of Asset Replacement

• Baseline• The customer will not receive any credit for the value of any

deferment of asset renewal expenditure by the distributor.• Option

• The customer will receive a credit for the value of any deferment of asset renewal expenditure by the distributor in accordance with the following table. Asset to be replaced Credited ValueWithin x years [x%] of replacement costGreater than x years No credit given

Page 9: 03 April 2009 energynetworks.org 1 Common Methodology Group Work Presentation from Workstream 4 Review of the Connection Charging Boundary in the CDCM

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WS 4 – Next Steps

• Issue Consultation (after Easter)

• Consider responses and discuss with Ofgem

• DNOs to bring forward formal modification proposals for implementation 1 April 2010.