Considerations for EHV charges for April 2010

María Isabel LiendoSP Energy Networks

DCMF, 04 June 2009

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EHV charging

• Four options for EHV charges for 2010:

•Current DRM-type model for all EHV customers

•Current DRM-type model for EHV demand customers and average

CDCM charges for generation

•Use CDCM end-to-end (for all customers)

•Use longer-term EHV charging method

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Option 1 - Current model for all EHV customers

Pros:•No modification proposal other than CDCM needed (? – see comments)•Potentially less price disturbances for EHV customers

Cons:•Two methodologies (and models) co-existing for one year, confusing to customers•Existing models treat DG allowed revenue as a separate “pot”, no clear way of incorporating the decision of one revenue pot

Comments:•Price disturbances are expected in 2010 regardless, DPCR5 settlement•Would a modification still be needed to “integrate” the CDCM and the exiting methodology?•A modification proposal could still be needed to deal with the DG issue

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Option 2 - Current model for EHV demand and CDCM for generation

Pros:•Potentially less price disturbances for EHV demand customers•Able to deal with DG customers and merged pots of allowed revenue

Cons:•Two methodologies (and models) co-existing for one year, confusing to customers•Two modifications needed. One (EHV) governed by the existing SC13 and one (HV/LV) governed by the new SC50 – how does this work?

Comments:•Price disturbances are expected in 2010 regardless, DPCR5 settlement

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Option 3 - CDCM end-to-end

Pros:•Only one methodology applied, consistency•Able to deal with DG customers and merged pots of allowed revenue

Cons:•There could be price disturbances to EHV customers

Comments:•Governance is not clear for a scenario of one modification proposal being governed by two standard conditions •Ofgem has indicated to DNOs that they will need a “clear justification for two step changes” •If moving to a “nodal” locational approach from 2011, frequent disturbances might be common

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Option 4 - Use longer-term EHV charging method

•Ofgem’s LRIC guidance has been published

•Not the case for FCP, but March decision document mentioned a version”

of FCP to be implemented – this does not exist yet

•This option is unlikely to be realistic by 2010