Impacts of Mod 244 Steve Nunnington xoserve

Background  96.5% of transportation charges based on capacity.  These are dependent on historical throughput.  Capacity charges on DM sites are based on:-  Bottom Stop SOQ. (BSSOQ) applicable to certain Interruptible sites.  DM SOQ.  Interruptible sites still pay 50% of firm costs.  BSSOQ can only be amended in the AQ Amendment window.  BSSOQ is based on the consumption of the Uncapped Winter Peak. (Highest daily demand between Oct – May)  Challenges are currently only allowed to those meter readings and consequently their derived consumption.  Number of challenges are very low.

Background  DM SOQ can only be reduced by shipper from October to January each year.  DM SOQ cannot fall beneath the value of the prevailing bottom stop SOQ.  DM SOQs are all passed to Networks for approval be they increases or decreases.  DM mandatory level is AQ of 58,600,000 Kwh below which they become voluntary.  Interruptible threshold AQ of 5,860,000 Kwh below which sites cannot be interruptible.  DM threshold. Site cannot be DM below AQ of 73,200 Kwh. There are currently 158 of these.  AQ needs to be reduced in line with SOQ to ensure the supply point falls within the correct charging band.  Ratchet mechanisms currently apply only Oct – May.  All these processes are fully systematised and are robust.

Analysis  There are 2058 DM supply points on xoserve systems.  Under Mod 244 there would be the following eligible sites:-  DM Interruptible 1410  DM Firm Mandatory 185  TOTAL1595  There are also 115 Unique Sites which qualify under the terms of the Mod but these could be dealt with under current US off line processes.

Analysis Comparing Feb 2008 & Feb 2009 % Change in Consumption DM FIRM MandatoryDM InteruptibleTotal Count% % % N/A 116%1138%1248% = -100% 84%1017%1097% -90% to -99% 42%171%211% -80% to -89% 53%50%101% -70% to -79% 32%111%141% -60% to -69% 63%211%272% -50% to -59% 84%373%453% -40% to -49% 95%413%503% -30% to -39% 126%675%795% -20% to -29% 179%916%1087% -10% to -19% 2715%15411%18111% 0% to -9% 3217%24517%27717% Increased Consumption 4323%50736%55034% Total Supply Points

Analysis  This would mean under the terms of Mod 244 for all DM Mandatories the number of candidate sites would be as follows  20% 587  30% 479  40% 400  50% 350  Additionally 51 US would fall in line with the 20% rate. Looking ahead  Should BSSOQ as a concept be scrapped or the definition be changed? (E.G AQ/365)  Should we allow DM SOQ appeals throughout the year?  Should ratchets be applied all year round for eligible sites?

Possible solutions  Rebates on Billing (Off-Line)  Bills issued as normal using SOQs  Rebate issued at M+2 to amended SOQ values  Monitoring of usage against various thresholds and consumption  Ratchet process required  Admin charge  Re-confirmation of the site under a new MPRN. (Off-Line)  Co-ordinated end date of MPRN and creation of new one  New values to be applied to new MPRN  Monitoring of usage against various thresholds and consumption  Ratchet process required  Admin charge  System solution (On-Line)  Investigating availability of a screen to amend BSSOQ.  Window for reducing DM SOQ may be parameterised.  Develop solution to monitor and carry out correct solutions when breaches apply.

Risks of an Off Line Solution  UK Link may not reflect true values  Labour Intensive.  Unique Sites process handles 115 sites.  Very labour intensive  Deals with around 20-25% of throughput  With 4.75 FTEs  Mod 244 currently has 587 candidates  Daily monitoring  Reads  SPA process (Does the Mod span transfers?)  Thresholds  Ratchets  Admin charge

Risks 2  Demand forecasting for Networks  Potential for manual errors in Billing  AQ could be out of sync with SOQ.  Process required to increase SOQ/AQ when site returns to normal production  Incorrect information regarding capacity availability.  Potential emergency impact if interruptible values are incorrect.  Development of off-line solution may be time consuming. Estimates range from 3 – 6 months from Ofgem approval.  Where shippers fail to comply there are complex activities such as ratchets that will need to be undertaken which will be both time consuming and labour intensive.  If analysis is incorrect and large volumes of supply points are submitted through this process the developed solution may not be appropriate.  DM CSEPS have not been considered along with impacts on IGTs.

Conclusions  Mod 244 should be driven by take up.  Small numbers will mean off line system  Larger numbers mean that a systematised solution is essential.