Introduction to the Distribution Connection and Use of System Agreement (DCUSA)

Introduction We hope that this webinar will provide you with the information you need to understand the DCUSA by covering the following:   What is the British electricity distribution system?  How does the DCUSA fit into the distribution system? Who is required to be a Party to DCUSA? What are some of the key areas that DCUSA covers?  How the DCUSA is governed and how to get involved? 1 5 4 3 2

Team members presenting this webinar are: Introduction Team members presenting this webinar are: Alexandra Moore, Governance Services Consultant Hollie Nicholls, DCUSA Senior Analyst

What is the British distribution system? Transmission level: Large power stations such as coal, wind farms. Powering large factories. Owned and managed by Transmission System Operators. Distribution Level: owned by six different Distribution Network Operators (also known as DNOs) each DNO operates in specific geographic regions, and also smaller Independent Distributors (IDNOs) which operate networks across the country. Distribution level delivers electricity to homes and offices. There is also a small amount of generation at this level, such as solar farms.

What is the British distribution system? Transition to Distribution System Operators (DSOs) In the future, the distribution system could look very different. Traditionally, DNOs have operated a network which had large scale generation (for example, large coal power stations) being delivered from the larger capacity Transmission network. Increasingly, generation is connecting at the Distribution level.

How does the DCUSA fit into the distribution system? All Parties that accede to the agreement are able to apply to be shareholders, as they all have a vested interest in the agreement running well. No profit is made by DCUSA Ltd and all unspent funds are distributed back to Parties at the end of each financial year. The DCUSA was created in 2006. As the electricity market opened and the number of suppliers increased, there was a need to standardise these agreements into a single, multi-Party agreement. The DCUSA doesn’t have any employees. However, it does employ ElectraLink to look after administrating the code and managing the finances of the company (DCUSA Ltd). 1 2 3

Who can be a Party? Distributors: DNOs charge for the use of the system that they maintain. This is the same for IDNOs, although they also need to pay towards using the upstream DNO network Electricity Suppliers: Will need to use the distribution system to transport electricity from generators to your property Offshore Transmission Operators: Need to use the distribution system to transport electricity from offshore generators Gas Suppliers: Enables them access to the distribution network to power the communication equipment for gas smart meters All Licensed Distributors and Suppliers, as well as the Offshore Transmission Operator, are obliged to become Parties to DCUSA. Gas Suppliers and CVA Registrants may also become Parties. These Parties hold important relationships with one another when it comes to running the distribution system.

What are some of the key areas that the DCUSA looks after? Common Connection Charging methodologies: Sets out how a new build house for example, would get their connection to the distribution network, how much this would cost and where they would connect. 3 Electricity demand control: Ensures that the supply of electricity is not affected by certain actions.  1 National Terms of Connection: Set out the terms and conditions that the licensed distributor requires you to accept. 2 The DCUSA governs how relationships between parties are managed. Some examples of this include:

DCUSA Governance: Stakeholder Groups The Board: Responsible for managing matters relating to DCUSA Ltd as a company, this includes the financial matters, approving accessions (becoming a Party to the agreement) and contracting for services. The Panel: Responsible for managing the DCUSA document. This includes overseeing the progress of change proposals progressing through the change process and monitoring industry change. Theft Working Groups: help develop mechanisms for reporting and detecting the theft of electricity and managing progress of this work. Standing Issues Group (SIG): is a pre-modification group where members discuss any issues relating to the operation of the agreement, in order to identify solutions before any Change Proposals are raised. Working Group: meetings where Parties to the agreement and other interested persons will evaluate, develop and define proposed solutions to any change proposals. Interventions Working Group (IWG): established to assist the interactions between distributors and suppliers as they have responsibility for the roll out of Smart meters . All industry codes need a form of governance in place in order to manage and regulate effectively. This is how it works in DCUSA:

DCUSA Governance: Stakeholder Groups Distribution Charging Methodology Development Group (DCMDG): Is another pre-modification group specialising in the Distribution Use of System (DUoS) Charging Methodologies. A Party or interested industry participant may raise an issue related to the DUoS Charging Methodologies. The DCMDG will review the issue and where possible, identify a solution before a Change Proposal is raised. It meets monthly and is open to all interested parties.

DCUSA Governance: Change Process The DCUSA Change process is an integral part to the running of the code. This allows the code to adapt to a changing environment.   01 In normal circumstances, only Parties to the agreement can propose changes, but the DCMDG, SIG and IWG meetings are forums where industry and interested persons can discuss changes. 02 An example of a change could be that an area of the agreement is no longer valid or required, or a new obligation is being placed on parties, so DCUSA needs to be updated to be able to evolve and align with industry. 03

DCUSA Governance: General Objectives The development, maintenance and operation by each of the DNO Parties and IDNO Parties of an efficient, co-ordinated, and economical Distribution System The facilitation of effective competition in the generation and supply of electricity and (so far as is consistent with that) the promotion of such competition in the sale, distribution and purchase of electricity The efficient discharge by each of the DNO Parties and IDNO Parties of the obligations imposed upon them by their Distribution Licences The promotion of efficiency in the implementation and administration of this Agreement and the arrangements under it Compliance with the Regulation on Cross-Border Exchanges in Electricity and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators. 

DCUSA Governance: Charging Objectives That compliance by each DNO Party with the Charging Methodologies facilitates the discharge by the DNO Party of the obligations imposed on it under the Act and by its Distribution Licence; That compliance by each DNO Party with the Charging Methodologies facilitates competition in the generation and supply of electricity and will not restrict, distort, or prevent competition in the transmission or distribution of electricity or in participation in the operation of an Interconnector (as defined in the Distribution Licences); That compliance by each DNO Party with the Charging Methodologies results in charges which, so far as is reasonably practicable after taking account of implementation costs, reflect the costs incurred, or reasonably expected to be incurred, by the DNO Party in its Distribution Business; That, so far as is consistent with Clauses 3.2.1 to 3.2.3, the Charging Methodologies, so far as is reasonably practicable, properly take account of developments in each DNO Party’s Distribution Business; That compliance by each DNO Party with the Charging Methodologies facilitates compliance with the Regulation on Cross-Border Exchange in Electricity and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators; and That compliance with the Charging Methodologies promotes efficiency in its own implementation and administration.

DCUSA Governance: DCUSA Change Process There are two routes that a Change Proposal can take – a ‘Part 1 Matter’, or a ‘Part 2 Matter’: Part 1 Matters are changes which are likely to have a material impact on parties, there could be potential for the change to maybe work unfairly for some parties in its effects. Part 2 Matters are any other proposal that does not fit the criteria for a Part 1 Matter. The outcome of these is determined by the Parties. Any change proposal may progress to a Working Group, to help aid development of a solution and put together the legal text changes required for the agreement. This work will then be released to parties as part of a consultation, to obtain industry feedback.

DCUSA Governance: Change Process For all CPs, a Change Report is developed, which sets out the finalised solutions and finalised legal text. The DCUSA Panel reviews any report, to ensure that the final proposal for a change will do what was intended and that there is sufficient information to understand and vote on it. 01 Voting outcomes are calculated on a weighted basis, dependent on how many MPANs each voting Party has. Two working days following the end of the voting period, a Change Declaration is issued to Contract Managers and to Ofgem. The Party vote for Part 2 matters, determines the outcome. The Party vote for Part 1 matters, forms a recommendation to Ofgem, who makes the final decision. 03 Once a change report is approved, this will be circulated to DCUSA Contract Managers (individuals who deal with the agreement on behalf of a Party). They will vote on the final proposal and its implementation date. Only Parties which would be impacted by the change are able to vote on it. 02

Keep in touch! Conclusion If you have any questions, please do not hesitate in getting in touch with us by using the live chat functionality on the DCUSA Website or email us at DCUSA@electralink.co.uk You can also sign up to our monthly newsletter or get involved in one of our groups! Keep in touch!