1. EDCM Workshop Workstream C Update Andy Pace - Chair 10 November 2010 1 | Energy Networks Association

2. WSC Objectives WSC Objectives – To assess the volatility of CDCM and EDCM To improve the transparency and predictability of EDCM and CDCM If necessary, to develop long term products to allow customers/supplier to mitigate the volatility inherent in the charging methodologies. 2 | Energy Networks Association 10 November 2010

3. WSC – CDCM (1) CDCM areas of work: Annual Review Pack CDCM volatility assessment User guide detail in to DCUSA Reduction of volatility Method M 3 7 th October 2010

4. WSC – CDCM (2) CDCM Annual Review Pack: To assist suppliers/customers in forecasting charges and risk management. Provides CDCM input data for a 5 year period Contains historical CDCM input data. Produces tariffs via a macro for each of the 5 years. Users can update CDCM inputs to produce their own tariffs. Contains commentary and DNO assumptions RPI separately identified and linked to relevant CDCM inputs. Issued 16 th Nov for comment 4 7 th October 2010

5. WSC – CDCM (3) CDCM Volatility Assessment: To provide suppliers/customers with an indication of the likely range of tariffs. Split into 2 sections – sensitivities & scenarios Group is currently identifying the major sources of volatility Group will focus on the top 3/4 sources of volatility to produce report in mid January A more detailed report which seeks to understand all sources of volatility and inter- dependencies will be released in April/May. 5 7 th October 2010

6. WSC – CDCM (4) CDCM User Guide into DCUSA: Much of CDCM detail is contained in the user guide. Move to DCUSA will make more of the methodology subject to open governance Clarification of methodology where detail is not provided. 6 7 th October 2010

7. WSC – CDCM (5) CDCM Reduction of Volatility: Historical data will be determined over 3 years: Coincidence factors Load factors Average split of rate 1 units by distribution time band Average split of rate 2 units by distribution time band Peaking Probabilities Timeband changes: Require 15 months notice Fixed for minimum of 3 years once changed Rate of return – assessing impact 7 7 th October 2010

8. WSC – CDCM (6) Method M model: Model review to ensure it is consistent. Reckon to write a user manual More detail to be put in DCUSA Method M to be updated to make it RIGS compliant 8 7 th October 2010

9. WSC – DCP 077 DCUSA mod to change CDCM rate of return from 6.9% to DPCR value (currently 5.6%) Submitted as an urgent mod. 1 week voting period ending 26 th November Ofgem have 28 days to decide. DNOs have requested Ofgem to make an early decision before the issue of indicatives in December. Default position agreed – issue with 6.9% and highlight change and how impact can be examined. DNOs have issued a impact analysis to assist process. 9 7 th October 2010

10. WSC – Indicatives 2011/12 Suppliers expressed concern over volatility of some CDCM inputs DNOs have published their assumptions for: Coincidence factors Load factors Average split of rate 1 units by distribution time band Average split of rate 2 units by distribution time band Peaking Probabilities Some DNOs are not updating the values for these inputs – data has been emailed and is on ENA website. 10 7 th October 2010

11. WSC – EDCM (1) EDCM Volatility Analysis produced for September 2010 – on ENA website Based on LRIC/FCP version used for notional Sep submission (not expected to change) Based on Demand Scaling option 25 used for notional Sep submission. Current proposals are substantially different 11 7 th October 2010

12. WSC – EDCM (2) New EDCM Volatility Analysis: Issue a range of prices for individual customers Issue summary data by DNO and nationally Currently determining the key variables to use to create scenarios: Allowed Revenue Peak Demand +/-3% on LRIC/FCP demand 12 7 th October 2010

13. WorkStream C – Next Steps CDCM Submit DCUSA mods for CDCM Issue CDCM Annual Review Pack Produce CDCM volatility assessment EDCM Produce a 1 year volatility analysis once methodology is locked down. Produce 5 year EDCM prices for each customer by varying Allowed Revenue. Standardise EDCM inputs once methodology agreed 13 7 th October 2010