Generation Use of System Charges Nigel Turvey

Background Regulatory incentive allows: Recovery of a percentage of any reinforcement costs A value per kW of generation connected An allowance for the O&M costs on the sole use and reinforcement assets The incentive applies to generation connected post April 2005 or to incremental additions to existing generators made post April 2005 This results in a positive allowed revenue from generation

Existing Position For generators connected at EHV: LRIC methodology applies which can result in positive or negative charges Continue to be cost reflective and do not need further amendment For generators connected at HV/LV: Charges calculated from yardsticks which have characteristics derived from demand data Originally set using cost data used in the last price control settlement Concerns raised whether this approach is cost reflective and whether there are benefits not being reflected in the charges For microgeneration: Charges set to zero At existing low level of activity neither costs nor benefits have been identified and zero charge continue to be appropriate

Proposed method for HV/LV generator charges - Data

Proposed method for HV/LV generator charges - principles Generation tends to be widely dispersed Unlikely that benefits (or cost not recovered in connection charges) will be seen at voltage of connection Some benefit likely at higher voltage levels due to the impact of multiple higher load factor generators For consistency with security standards, benefits will not be applied to intermittent generation Yardstick constructed including: negative coincidences at voltage levels above the voltage of connection (for high load factor generators) zero coincidence at the voltage level of connection Positive service connection costs

Proposed method for HV/LV generator charges - scaling Proposed method will result in negative export yardsticks whilst allowed revenue is positive Whilst scaling to a positive allowed income will reduce the pricing signals it will reflect a recovery of other costs not in DRM yardsticks Scaling by a £/kW adder will be required Scaling to required revenue will result in low load factor generators (generally renewable) having higher UoS charges than at present The only way to prevent this would be to recover some allowed generation revenue from demand – this would require Ofgem’s agreement

Proposed method for HV/LV generator charges – resulting charges South WalesSouth West Existing ChargeProposed ChargeExisting ChargeProposed Charge Microgeneration £0No Change£0No Change Profiles 5 to p/MPAN/day??6.49p/MPAN/day?? LV > 60% Load Factor 2.01p/kVA/day p/kVA/day 1.67p/kVA/day p/kVA/day LV < 60% Load Factor 5.85p/kVA/day4.43p/kVA/day HV > 60% Load Factor 2.49p/kVA/day 0.37p/kVA/day 1.74p/kVA/day -2.68p/kVA/day HV < 60% Load Factor 5.75p/kVA/day4.14p/kVA/day EHV-4.51 to +2.25p/kVA/day No Change to +1.77p/kVA/day No Change

Some examples – low voltage connections South WalesSouth West Existing annual charge Proposed annual Charge Existing annual Charge Proposed annual Charge 250kVA Demand, 30%LF 20% of units at night £11,104No change£9,810No Change 250kVA landfill generator operating at 70% LF £1,834£-10,870£1,524£-11, kVA windfarm operating at 30% LF £1,834£5,340£1,524£4,044

Some examples – high voltage connections South WalesSouth West Existing annual charge Proposed annual Charge Existing annual Charge Proposed annual Charge 1MVA Demand, 30%LF 20% of units at night £25,313No change£22,627No change 1MVA landfill generator operating at 70% LF £9,089£1,340£6,351£-9,794 1MVA windfarm operating at 30% LF £9,089£20,987£6,351£15,117

Proposed method for HV/LV generator charges - timetable Draft modification report prepared Expecting to issue a WPD consultation to get users views shortly Modification request to Ofgem June/July Implementation April 09