Energy Suppliers Forum CDCM/EDCM - CMG Update Mo Sukumaran – CMG 10 November | Energy Networks Association

Introduction CDCM: Covers HV and LV DUoS charges Common Methodology implemented on 1 April 2010 Subject to DCUSA DCMF – Annual Review and opportunity to raise issues CMG WSC undertaking volatility analysis 2 | Energy Networks Association 10 November 2010

Introduction EDCM: Covers EHV and HV Substation DUoS charges Following Ofgem consultation: Submission of proposals - 1 April 2011 Implementation (including pre-April 2005 DG and CDCM/EDCM boundary change) - 1 April 2012 CMG timeline has changed in response CMG has written to stakeholders about changes 3 | Energy Networks Association 10 November 2010

EDCM Update WSA – Development of LRIC and FCP Powerflow based ‘forward looking’ costs: Common FCP and LRIC methodology identifies future demand led and generation led network reinforcements Both methods produce £/kVA ‘marginal charges’ on nodal (LRIC) or network group (FCP) basis Provides network ‘congestion’ cost signals to customers 4 | Energy Networks Association 10 November 2010

EDCM Update WSB – Development of common charging model: Allocate costs on notional network basis Scaling - required to match target revenue Final Demand tariffs: Fixed charges p/day (sole user assets) p/kVA/day capacity charges Unit rate being considered Final Generation tariffs: Fixed charges p/day (sole user assets) p/kVA/day capacity charges p/kWh generation credits 5 | Energy Networks Association 10 November 2010

EDCM Update WSB – Development of common charging model: Numerous Allocation and scaling methods considered Significant price impacts for customers in all DNO areas Option 30 uses a notional path method for allocation of costs ‘Justification’ of level of charges 6 | Energy Networks Association 10 November 2010

EDCM Update WSC – CDCM / EDCM Volatility Analysis: CDCM Improving transparency & predictability of CDCM Production of 5 year tariffs More detail and standardisation of CDCM inputs Review of methodology statement/user guide Volatility of inputs and solutions for mitigation Potential DCUSA changes EDCM Undertake volatility analysis and provide scenarios over a 5 year period Standardise EDCM inputs once methodology agreed 7 | Energy Networks Association 10 November 2010

Boundary change Current Boundary for applying site specific charges: All customers connected at 22kV or above Any customers connected at less than 22kV but on site specific charges prior to 1 st April 2010, will continue to be charged site specific charges. Any new connectee lower than 22kV will receive CDCM tariffs; 8 | Energy Networks Association 10 November 2010

Boundary change New Boundary for applying site specific charges: (effective from 1 st April 2012) All customers at 22kV or above All customers metered at a HV substation Note: Customers who are currently on site specific charges who do not meet the above criteria will migrate to CDCM on 1 st April | Energy Networks Association 10 November 2010

Ofgem decision Ofgem have decided to move the boundary for “site-specific” customers down to C1 and C2 – i.e. customers connected between 1kV and 22kV directly to the substation This decision will be implemented in April 2012 alongside the pre-2005 connected generation arrangements and the EDCM. 10 | Energy Networks Association 10 November 2010

Treatment of pre 2005 generation DPCR5 removed the exemption on pre April 2005 DG from paying use of system charges Some DNOs made modification applications earlier this year to integrate pre and post 2005 DG Ofgem requested that these were withdrawn to facilitate an Ofgem consultation on these issues Ofgem consulted on these issues between 21/07/2010 and 01/09/2010 Ofgem and DNOs are continuing discussions on treatment of pre and post 2005 DG for EDCM 11 | Energy Networks Association 10 November 2010

Treatment of pre 2005 generation There are three key issues that need decisions/guidance: –Principles that should be followed in deciding whether compensation is due and if so how it should be calculated –If compensation is due, whether this should be an unbundled ‘one-off’ payment to the generator or whether it should be a bundled discount to a use of system charge –From what date should charges apply to pre April 2005 EHV generators Ofgem issued a decision on the second of these on 23 rd August requiring an unbundled solution The third issue was referred to in the decision letter on EDCM timelines issued on 22 nd September which stated ‘Distributed generators (DG) connected at EHV who connected on pre-April 2005 terms will be subject to the arrangements for DG customers that will come into effect on the revised implementation date of 1 April 2012.‘ 12 | Energy Networks Association 10 November 2010

Treatment of pre 2005 generation Proposed DNO position on compensation is as follows: Operations and maintenance uplift –We believe that arrangements are needed to refund the unexpired proportion of capitalised O&M charges Connection and reinforcement cost –There is no discrimination that needs to be addressed for these one-off costs of connection 13 | Energy Networks Association 10 November 2010

Treatment of pre 2005 generation We await Ofgems decisions on what, if anything should be compensated for We also require Ofgem to consider and decide on: –a practicable compensation scheme (e.g. if reinforcement is to be compensated for, how to retro-apply apportionment rules; missing records, etc) –a uniform national basis for compensation (many DG parties are national operators, so should not face widely varying local interpretations) –Clear, definite and secure arrangements for DNOs to recover all compensation paid (in DPCR6 or otherwise) Ofgem are currently seeking further information from DNOs on the detailed arrangements concerning each pre 2005 generator Some DNOs have, where necessary, started to seek changes to contractual arrangements between DNOs and generators to facilitate charging once decisions has been made 14 | Energy Networks Association 10 November 2010

Outline timeline DCMF meeting 2 December 2010 Consultation published 10 December Consultation workshop 13 January 2011 Consultation closes 31 January DCMF meeting 3 February EDCM submission deadline 1 April See ENA web site for details of timeline: project-plan-and-project-risks/ 15 | Energy Networks Association 10 November 2010

Revised plan 16 | Energy Networks Association Model Lockdown End of December April 2011 Submission Sept Oct Nov Dec Jan Feb Mar Apr Option 27 24/9 Opinion 30/9 Option 30 28/9 Opinion 7/10 DCMF 7/10 Trial Justification Workshop 18/11 Further Development Consultation Testing Review Publish Responses Industry Briefing DCMF 2/12 Workshop 13/1 DCMF 3/2 Prepare Consultation DCMF TBC Benchmarking / Justification Generation in Generation Dominated Areas IDNO Networks Consult 10/12 Testing / Quality Review Documentation 11/12 Prices Modelling for Submission Volatility Analysis Methodology Review WSC Review Volatility Analysis Document DCUSA Review Justification Criteria 10 November 2010

DCMF Open governance Summary Modifications process managed under DCUSA, like any other DCUSA change Ofgem has asked for issues and modification ideas to be raised first at DCMF DNOs are planning their own resources under the auspices of ENA (Commercial Operations Group) 17 | Energy Networks Association 10 November 2010

DCMF Open governance 18 | Energy Networks Association Forum for establishing issues with charging methodologies Communicating and debating solutions DCMF Standing issues Group Prioritisation of issues Manage issue proposals to DCMF Assist end-users in forming change proposals Issue 1 Issue 2 COG Charging group DNO resource management Scenario modelling Model development DCUSA Change proposal 1 Change Proposal 2 Establish a secretariat for the DCMF change management process – how is this funded? (ENA) How is the DMCF SIG constituted ? (Chair elected from the DCMF) Covers EDCM and CDCM No proposed limitations on the working group numbers 10 November 2010

CDCM issue raised Recommendation received Issue assessed and developed Min 15 WD Consultation for standard changes DNO modeling carried out (note: possibly coordinated by the COG Charging Group) Min 15 WD Consultation for standard changes DNO modeling carried out (note: possibly coordinated by the COG Charging Group) Review and challenge Consultation presented to SIG Initial assessment Report presented to the DCUSA Panel Response to consultation reviewed & published Progress CP? Progress CP? Added to next SIG Progression route and timetable confirmed Working Group Invitations sent and assessment carried out Authority decision letter issued Change declaration issued to Ofgem Yes Potential resource provision from COG Parties vote and issue DCUSA recommendation 19 | Energy Networks Association 10 November 2010