5 February 2009 energynetworks.org 1 Common Methodology Group Work PRESENTED BY OLIVER DAY ON BEHALF OF WORKSTREAM 3 Workstream 3 Tariff Application

5 February 2009 energynetworks.org Workstream 3 Workstream meets every week Workstream comprises: 7 DNO Group members 2 Supplier representatives DNO appointed consultant Optional Ofgem/Generator/IDNO attendee energynetworks.org 2

5 February 2009 energynetworks.org Progress to Date Progress reported at last DCMF Initial core tariff list Review of DNO billing system capabilities Review of ISG’s capacity and reactive sub- group NHH metered ‘De-linking’ proposal Identification of tariff application issues Format of ‘Tariff Recommendation’ energynetworks.org 3

5 February 2009 energynetworks.org Progress since last DCMF Issues meeting with Ofgem ‘Minded to’ sought on three areas Core tariff list DNO billing system ‘commonality’ costs Generator tariff components Ofgem response requiring more work De-linking proposal DNO billing system requirements energynetworks.org 4

5 February 2009 energynetworks.org Core tariff list Initial list provided reduced number of simple tariffs to suit commonality DNOs responding to suppliers ‘wants’ Ofgem concerned that achieving the ‘common denominator’ should not impact cost reflectivity i.e outcome could be sophisticated or simple DNOs to review list and measure impact energynetworks.org 5

5 February 2009 energynetworks.org Billing modification costs Benefit of synergies seen throughout the industry and realised by end users Concern raised with Ofgem that April 2010 tariff commonality will create short term cost (possibly significant) to DNOs and suppliers DNOs will require support from suppliers in terms of measuring synergy savings DNOs seeking clarification on the treatment of costs for ‘brought forward’ billing system enhancements energynetworks.org 6

5 February 2009 energynetworks.org Generator tariffs DNOs concerned about potential generator credits applied on connection capacity Would provide generator incentive to declare capacity Does not reward actual output DNOs suggest kWh approach more reflective of benefit DNOs need to revisit issue with Ofgem to provide further clarification energynetworks.org 7

5 February 2009 energynetworks.org De-linking proposal Initial paper presented Limited feedback received Concern over market domain data Further update paper circulated Clarify that proposal does not affect MDD Proposal uses existing D0030 files HH profile data rather than TPR totals WS3 to host a meeting on de-linking proposal energynetworks.org 8

5 February 2009 energynetworks.org Next Steps Revise core tariff list + impact Progression of de-linking proposal + impact Seek estimates of billing & validation modification costs Common tariff (with/without de-linking) Seek further generator tariff clarity Tariff recommendation paper Defining common tariff structures and charging principles energynetworks.org 9

5 February 2009 energynetworks.org Future Areas… IDNO tariff structure and billing (current progression through Ofgem facilitated IDNO/DNO meetings) Generator tariff structure HH metered threshold and smart metering New products Long-term tariff scenarios Long-term fixed pricing arrangements energynetworks.org 10