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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
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
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
03 April 2009 energynetworks.org •4
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.
03 April 2009 energynetworks.org •5
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
03 April 2009 energynetworks.org •6
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
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
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
03 April 2009 energynetworks.org •9
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.