Mod Proposal 0268 : AQ Backstop Date Phil Lucas (22 October 2009, Solihull)

Background AQ is derived from historic consumption to represent a view of expected consumption in the next 12 months AQs revised on 1 October each year Historic consumption adjusted by a Weather Adjusted Annual Load profile (WAALP) to a Seasonal Normal value UNC defines which periods are able to be utilised to quantify historic consumption - the ‘Relevant Metered Period’ (UNC H3.2)

Relevant Metered Period Metered between two reads: Ending Meter Read (last valid reading prior to 10 August) Target Opening Date (42/50 weeks prior to ending Meter Read for Annual/Monthly Read) Earliest possible ‘starting Meter Read’ specified as last valid meter read prior to the Target Opening Date (up to 3 years preceding such Date), or If no valid reading in this 3 year period, the first valid reading after the Target Opening date, provided that the starting Meter Read is no earlier than 1 October 2002 (the ‘AQ backstop Date’)

Existing Backstop Date UNC Modification 0018 (2005) Impact At that point - period that could be used in AQ Calculation (1 October 2002 to March 2005) was 2 years 5 months Number of Meter Points that did not calculate as a result was 446 (11 SSP, 435 LSP) Representing 0.01% of 4.5 million total that did not calculate

Treatment of Un-calculated AQs For AQs that are not calculated (i.e. Carry Forward AQs) A multiplicative factor per EUC is applied to the current AQ value to adjust from the old SN basis to the new SN basis Defined in UNC H3.4.4 (AQ = (Current AQ x (A/B)) e.g. An AQ of 20,000 kWh in EUC Band 1 Adjusted by multiplying difference between the old aggregate WAALP (eg: 356) and the new aggregate WAALP (eg: 352) Result 0.9888 AQ to be effective from 01/10/10 on the new basis is 19,776 kWh

Issue As the ‘AQ Backstop Date’ is currently static, it becomes increasingly irrelevant Cyclic reading and associated must read provisions effectively move the earliest potential starting Meter Read date forwards Maximum gap between readings for Annual Read meter is 2 years Maximum gap between readings for Monthly Read meter is 4 months Revised WAALPs will apply for 2010 AQ Review as a consequence of the 2010 SN review Need to be applied to any retrospective consumption periods that could be utilised within the 2010 AQ Review. Under current terms this is notionally 1 October 2002 WAALPs will be recalculated using new SN basis back to 1st October 2006

Requirements Replacement of the existing ‘hard coded’ date with an enduring solution A backstop date which rolls forward upon the implementation of revised SN values (as required by H1.4.2) This would be 1 October in the 4th year prior to the start of the Gas Year in which a SN Review becomes effective, and the new ‘Backstop Date’ would become effective from 1st February of the preceding Gas Year (enables the provisional AQs to be calculated using the revised SN values) Examples For a SN Review which becomes effective from 1 October 2010, from 1 February 2010 the backstop date will be 1 October 2006 For a SN Review which becomes effective from 1 October 2015, from 1 February 2015 the backstop date will be 1 October 2011

Consequences of Implementation On a normal 5 yearly SN Review cycle, the backstop date would be at its shortest point (February prior to SN change effective year) 3 years 4 months at its longest point (January prior to SN change effective year) 8 years 4 months The impact of this option in regards to AQs not being calculated is anticipated to be small: Full detailed impact analysis available on presentation given to DESC in early October Seasonal Normal Review 2005: Backstop date change Shortest period that could be used (01/10/02 to March 2005) was 2 years 5 months Shortest period in this proposal (01/10/2006 to 01/02/2010) will be 3 years 4 months (additional year)

Effect of Implementation

Timetable 2nd October Topic raised & discussed at DESC 15th October UNC Mod raised at UNC Mod Panel – referred to Workstream 22nd October Discuss at Distribution Workstream 10th November Discuss at DESC 26th November Discuss at Distribution Workstream – finalise Workstream Report 17th December Modification Panel consider Workstream Report – issued for consultation Mid January Representations close out 21st January Modification Panel make recommendation – Final Modification Report issued to Ofgem 11th February (max) Ofgem determination & Implementation 12th February UK Link system update of backstop begins March UK Link system update complete