1 EHV DG Charging Nigel Turvey

2 Background Our current EHV charging methodology was not vetoed on 18 th February 2010 with the following treatment of pre 2005 EHV DG ‘Charging arrangements for EHV generators connected prior to 1st April 2005 are subject to appropriate charging arrangements being developed through industry collaboration. Until this is developed, no charges will apply to these generators.‘ Ofgem has requested each DNO to bring forward interim proposals to apply during 2010/11 We have 4 pre 2005 EHV connected CVA settled generators that have connection and use of system agreements and 22 pre 2005 EHV connected SVA settled generators with connection agreements None of these agreements contain an express right to charge for UoS, although Generators operating in the SVA contract with a Supply Licence holder to export. In the SVA market, use of system charges are levied via suppliers and these are contractually enabled by DCUSA

3 Options considered 5 options were considered as follows: 1.Status quo – continue to not charge 2.Charge pre 2005 DG on same basis as post 2005 DG – takes no account of contractual rights 3.Charge pre and post the same as contracts allow – would result in double charging for some assets 4.As 3 but refund relevant proportion of deep connection charges – requires information that was not retained 5.As 3 but discount charges to reflect charges arising from assets contributed to at the time of connection A further option was raised by generators to pay compensation equal to the NPV of future charges – financial effect is the same as option 1 but more complex to implement

4 Proposed change Option 5 is proposed This follows a principle that pre 2005 EHV generators continue to benefit from rights to use assets that were contributed to at the time of connection without further charge but are charged for assets not contributed to at the time of connection The method is a discount to the UoS charge for the remaining period of the connection agreement, or where there is no termination date 20 years after connection Whilst not part of the methodology, there will be a commitment to take steps within our reasonable power and control to modify any connection agreement that does not currently allow charges to be applied – including referral for determination if necessary

5 Better meeting Licence objectives The proposal better meets the licence objectives in the following ways: –Compliance with SLC 19 (Prohibition of discrimination) –Levelling treatment of pre and post 2005 EHV generators facilitates competition –Recognising contractual rights is important to facilitate competition –Recognising historic payments reflects the costs incurred

6 Timetable Modification request to be submitted to Ofgem in next few days Our expectation is that Ofgem will consult and hence we are unlikely to have a decision by 30 th June 2010 Issue 3 month notice of price change by 30 th June - likely to contain two sets of prices, zero charges if methodology is vetoed or the proposed charges if not vetoed Looking for a decision by 20 th August 2010 to comply with the 40 day notice requirement in DCUSA 1 st October – charges apply