1. Accompanying Narrative
Robert Wigginton
March 2017 MOD 186
Accompanying Narrative

2. Contents Movements since the last MOD186 report 2018/19 Price Drivers
Exit Capacity forecast
Key risks and uncertainties

3. Movement Since December 2016
2016/17
2017/18
2018/19
2019/20
2020/21
Reported at the last DCMF
399.95
405.26
420.81
460.69
449.06
Reflected the December Direction from Ofgem for Theft of Gas which impacted MPt in 15/16, flowing through to 2017/18 in ‘K’ ò
-0.30
0.00
RPI updated for the Treasury forecasts published in February 2017
-1.10
-0.95
0.39
Updated for latest view of Shrinkage and Leakage model ñ
1.18
1.26
1.32
Updated latest view of iBOXX and ‘Mod T’
3.38
-1.76
3.39
Updated for latest gas prices
0.03
-0.25
-0.33
Updated Hard Coded incentive figure in ‘BMt’ and ‘EEIt’
-0.38
-1.46
0.07
-0.01
Updated for latest view of collection (‘K’)  ñ
0.62
Reported in the latest MOD186
399.57
403.50
424.98
458.97
453.83
Net Movement
0.38
1.76
-4.17
1.72
-4.77

4. Split of Maximum Allowed Revenue (MAR)
Only AEx impacting as cost = allowance in T-2
Impacted by AEx and cost true up

5. 2018/19 Price Drivers - Transportation
£’m
Commentary
Collected forecast for 2017/18
379.2
Assumed to match allowance.
Forecast Collected
375.4
Assumes that the rolling AQ will decrease the chargeable base by 1%
Variance because Collection is greater than allowance
N/A as 2017/18 Allowance = collection currently
Movement from 09/10 Base, MODt plus TRUt
A lower Base revenue at FPs with a higher MODt but lower TRUt forecast
Movement from an additional years inflation on the above
10.2
A further years inflation for 2018/19 when compared to 2017/18
Movement in Cost Adjustment
0.5
Broadly the same, with Business rates slightly higher than allowance resulting in increasing 2018/19
Movement in Incentives
0.1
Broadly the same
Movement in K
Increased over collection in 2016/17 when compared to 2015/16. This was a result of the Load Factor impact from the October 2016 AQ review.
Forecast collection without a price change
375.5
Allowance 2018/19
379.3
Price change forecasted to be required
1.0%

6. 2018/19 – Exit Capacity
Average Price Change (accounting for the variance between allowance and forecast collection)
Forecast Price change by Exit Zone
2017/18
2018/19 %
SW1
0.0119
0.0226
90%
SW2
0.0177
0.0342
93%
SW3
0.0256
0.0499
95%
WA1
0.0172
0.0333
94%
WA2
0.0068
0.0124
82%
91.5%

7. Exit Capacity Forecast
Volumes
High degree of certainty given booking are made in advance
Price
NTS publish prices in May effective October. This may impact the individual price changes for 2018/19 but would not impact the overall change for 2018/19.
2019 onwards remains speculative based on the NTS EU Tariff Code review
Forecast Unit Rates
Year on Year price change %
2017/18
2018/19
2019/20
2020/21
SW1
0.0119
0.0226
0.0282
0.0216
SW2
0.0177
0.0342
0.0425
0.0334
SW3
0.0256
0.0499
0.0618
0.0492
WA1
0.0172
0.0333
0.0414
0.0325
WA2
0.0068
0.0124
0.0157
0.0115
2017/18
2018/19
2019/20
2020/21
SW1
31%
90%
25%
-23%
SW2 4%
93%
24%
-21%
SW3
-9%
95%
-20%
WA1
-32%
94%
WA2
152%
82%
27%
-27%

8. Key risks and uncertainties
What
Why
How Much
Enhanced Physical Site Security Re-opener
2018 is the next opportunity to submit costs for Ofgem. WWU intends to submit what it deems efficiently incurred cost
We estimate the efficiently incurred cost at c£18m, of which c£10m would impact 2019/20. Following RRP in July 2017 we will seek to include this in the MOD186 forecast
Smart Metering
A reopener for smart metering exists
The number of smart meter installs within WWU remains relatively low therefore forecasts are not considered robust enough at present
Exit Capacity post 2019/20
EU tariff code may materially change the costs being incurred vs allowance
The opportunity to align cost with allowance is limited based on the current UNC requirements on NTS however a material step change may require reconsideration of this

9. Thank you
Robert Wigginton Pricing and Regulation Manager