2. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. HV/LV Generation Charging April 2008 Oliver Day Distribution Pricing Manager

3. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 3 BACKGROUND Objective to establish a common set of principles to be enacted in the short term Understood and adopted by industry Seen as meeting licence objectives by Ofgem Update following request for proposals from last DCMF High level solution shared with other DNOs Documenting progress by EDF Energy Networks

4. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 4 HIGH LEVEL PRINCIPLES AND ASSUMPTIONS BERR - ‘committed to tackling the barriers preventing widespread take up of low carbon technologies’ Purpose Creation of economic pricing signal Network planning requirements continue Solution covers expected development over next 5-10 years Network is demand dominated and network infrastructure is paid for by DUoS EHV connected generation covered by site specific charges ‘On site’ generators will offset the need to reinforce for demand users Generation will be absorbed locally – losses will reduce Treating generation users as collective groups in the same way as demand groups HH metered with appropriate tariff structures should be a preference for generators

5. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 5 OFFSET CONTEXT Before 100kVA GSP EHV HV LV 25kVA HV Generator After 100kVA 95kVA 70kVA 5kVA LV Generator Illustrating a very simplistic approach No allowance is made in this example for network losses

6. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 6 OFFSET RATIONALE In the short term there is a need to: view ‘average’ effect of generation, in same manner that demand is seen assume the network as ‘demand dominated’ Benefit granted to generators through reinforcement costs offset for: Proportion of offset reinforcement costs of assets at point of connection EHV Assets and assets above voltage of connection NGC Exit Points

7. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 7 OTHER CONSIDERATIONS Network losses Propose to treat as opposite of demand in short term Costs not recovered in connection charges Use of system CapEx + O&M Generation tariffs Preference to use HH SToD tariff structure Need for accurate average NHH profiles for generation technologies Allowed Revenue Separate DG price control is barrier to offering payments Can a ‘benefit’ transfer be justified? Small cost to demand with significant benefit to generation

8. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. 8 NEXT STEPS Other DNOs progressing similar ideas EDF Energy Networks, ENW and REA Starting debate with interested parties Looking for simplified route to solution Dialog with generators to understand barriers and issues Focused workshop Objective to establish common set of HV/LV generation charging principles Looking for DNOs, Generators and Ofgem participation Maybe possible for singular consultation to enable ‘fast track’ methodology approval

9. Charging Methodology Development Oliver Day © Copyright EDF Energy plc. All rights reserved. QUESTIONS