Considerations for EHV charges for April 2010 María Isabel Liendo SP Energy Networks DCMF, 04 June 2009

2 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

3 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

4 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

5 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

6 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