1 / 59

EDCM submission workshop

EDCM submission workshop. 12 May 2011. Andrew Neves CMG Chair 12 May 2011. 1 | Energy Networks Association - CMG . Purpose of the day. 12 May 2011. 2 | Energy Networks Association – CMG. To give you a chance to interact – questions/feedback

arch
Download Presentation

EDCM submission workshop

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. EDCM submission workshop 12 May 2011 Andrew Neves CMG Chair 12 May 2011 1 | Energy Networks Association - CMG

  2. Purpose of the day 12 May 2011 2 | Energy Networks Association – CMG To give you a chance to interact – questions/feedback To provide an overview of the proposal submitted to Ofgem To provide details on the impact of the submission and volatility analysis To provide details on how the charges can be influenced by customers To assist and encourage responses to Ofgem’s forthcoming consultation To detail the next steps

  3. Workshop agenda 12 May 2011 3 | Energy Networks Association – CMG Background and objectives (Ofgem) EDCM background and development process The EDCM submission Objectives of the EDCM and how they are met Practical demonstration of the EDCM model EDCM potential volatility ................Lunch .................. Managing your charges Stakeholder Q&A Next steps

  4. EDCM submission workshop 12 May 2011 EDCM background and objectives Ofgem 4 | Energy Networks Association

  5. Background to the EDCM 12 May 2011 5 | Energy Networks Association – CMG Forecast DNO investment of £2.3 billion in the network between 2010 and 2015 On July 2009 Ofgem published guidelines for the EDCM based on LRIC and FCP Ofgem July 2009: “Given the extent of this investment and the significant increase in energy prices in recent years, it is important we do all we can to have charging arrangements to encourage customers to locate where there is spare capacity” On 1 October 2009 licence conditions comes into force requiring DNOs develop and implement the EDCM based on the guidelines published in July 2009

  6. Background to the EDCM 12 May 2011 6 | Energy Networks Association – CMG Ofgem published their decision on the boundary between the EDCM and CDCM in August 2010 The EDCM will apply to all “designated EHV properties”, including generators connected before April 2005 Ofgem decision that EDCM charges would be “unbundled” from any compensation for deep connection charges Ofgem guidance on the treatment of pre-2005 DG published on 9 May 2011

  7. EDCM development process 12 May 2011 7 | Energy Networks Association – CMG DNOs set up three workstreams working under the direction of the Common Methodology Group (CMG) Workstream A led the development of the FCP and LRIC methodologies Workstream B focused on tariff methodologies and models, and tariff application rules Workstream C led the work on the price stability and the development of long term products All workstreams were open to stakeholders, including Ofgem, customers, suppliers and IDNOs

  8. EDCM development process 12 May 2011 8 | Energy Networks Association – CMG First consultation on the EDCM was issued in June 2010, followed by a supporting workshop DNOs published an information report in September 2010 A development workshop was held in November 2010 Second consultation on the EDCM was issued in December 2010, followed by a supporting workshop in January 2011 A mini-consultation on issues relating to licensed distribution network operators (LDNOs) was issued in February 2011 Final EDCM proposals submitted to Ofgem on 1 April 2011 Awaiting Ofgem decision before implementation

  9. Current position 12 May 2011 9 | Energy Networks Association – CMG EDCM submitted to Ofgem and published on 1 April, see: http://2010.energynetworks.org/edcm-file-storage/7-edcm-deliverables 2011/12 Illustrative tariffs based on the methodology submitted to Ofgem Customer total charges not provided due to legal constraints Please contact relevant DNO with any questions about particular customers’ tariffs

  10. EDCM submission workshop 12 May 2011 Overview of the EDCM submission Shankar Rajagopalan Reckon LLP (ENA/CMG consultant) 10 | Energy Networks Association

  11. The EDCM submission (1) 12 May 2011 11 | Energy Networks Association – CMG • The EDCM report • Describes the methodology and provides commentary on decisions and choices made. • Appendix 1: Illustrative tariffs for end users and LDNOs • Purely illustrative. • Tariffs relate to the charging year 2011/2012 • Tariffs are anonymised: Contact your DNO or supplier to identify the tariff that relates to your site • Appendix 2: Draft FCP and LRIC methodology statements • Appendix 3: Areas of implementation risk • Appendix 4: Super-red time bands by DNO area

  12. The EDCM submission (2) 12 May 2011 12 | Energy Networks Association – CMG • Appendix 5: EDCM volatility analysis • Appendix 6: Blank models • Blank FCP and LRIC models for EDCM end user tariffs (DNO and LDNO connected customers) • Blank “extended Method M” models for LDNO discounts on CDCM tariffs. • Appendix 7: Draft LC14 charging statement • Appendix 8: Commentary from individual DNOs on the justification of tariffs • Appendix 9: Deviations from Ofgem specifications

  13. Objectives of the EDCM 12 May 2011 13 | Energy Networks Association – CMG • The overall objective of the EDCM is to produce cost-reflective Use of System Charges to encourage new and existing users to: • Use existing network capacity more efficiently • Avoid prompting inefficient network reinforcement • The EDCM aims to achieve the overall objective by incorporating • site-specific charging elements calculated using the long run incremental charging (LRIC) and forward cost pricing (FCP) methodologies • Allocating cost-based and demand scaling elements using appropriate charge drivers

  14. EDCM objectives in the licence 12 May 2011 14 | Energy Networks Association – CMG • Four “relevant objectives” • …“compliance with the EDCM facilitates the discharge by the licensee of the obligations imposed on it under the Act and by this licence.” (Licence condition 50A.7) • … “EDCM facilitates competition in the generation and supply of electricity and will not restrict, distort, or prevent competition in the transmission or distribution of electricity or in participation in the operation of an Interconnector.” (Licence condition 50A.8) • …“compliance with the EDCM results in charges which, so far as is reasonably practicable after taking account of implementation costs, reflect the costs incurred, or reasonably expected to be incurred, by the licensee in its Distribution Business.” (Licence condition 50A.9) • …“so far as is consistent with the first three Relevant Objectives, the EDCM, so far as is reasonably practicable, properly takes account of developments in the licensee’s Distribution Business.” (Licence condition 50A.10)

  15. Objectives of the EDCM 12 May 2011 15 | Energy Networks Association – CMG • The EDCM “must conform to the principles and assumptions” of LRIC and FCP methodologies published by Ofgem in July 2009. (SLC 50A.12) • Ofgem letter to DNOs in September 2010 introduced additional requirements: • Consult with customers before Christmas 2010 • Amend the methodology to address comments - final proposals should not require “substantial further work” before implementation • “Sense-check” charges and ensure that they can be justified, particularly where there is a significant change up or down from current charges. • Ensure that customers understand the methodology and illustrative charges – explore ways in which they can manage their charges

  16. Challenges and issues 12 May 2011 16 | Energy Networks Association – CMG • Different objectives • Charges must “reflect the costs incurred, or reasonably expected to be incurred” by the DNO • EDCM must encourage efficient use of the network and avoid some reinforcement (through FCP or LRIC charges) • These objectives might conflict with each other • Common method is difficult to reconcile with differences in network structure and customer profiles across GB • Charges based on avoiding future reinforcement costs might conflict with the desire to encourage embedded generation

  17. How the requirements were addressed 12 May 2011 17 | Energy Networks Association – CMG • Final charges include elements from FCP or LRIC methodologies • Improvements to the original specifications from Ofgem • Capping of LRIC charges introduced following sense checks • Different types of test-size generators in FCP following sense checks • Identifiable DNO costs are pre-allocated before demand scaling – Improved cost-reflectivity of final charges • Generation scaling introduced to target a notional recovery from DG, based on the DG incentive scheme

  18. How the requirements were addressed 12 May 2011 18 | Energy Networks Association – CMG • Asset-based method produces a fair allocation of allowed revenue between CDCM and EDCM demand customers • Appropriate charge drivers for the pre-allocation of costs and demand scaling aimed at producing justifiable final charges that recover the EDCM target revenue • Using notional site-specific assets through network use factors produce charges that reflect usage of network assets • Capacity and consumption during the DNO peak time band also reflect network usage and drive the need for network reinforcement

  19. How the requirements were addressed 12 May 2011 19 | Energy Networks Association – CMG • On competition in electricity distribution • More granular definition of DNO-LDNO boundaries • Better allocation of indirect costs for EDCM customers connected to LDNOs • We consulted with customers and other stakeholders in June 2010 and January 2011. • Information report published in September 2010 • Mini-consultation on LDNO charging in February 2011 • National workshops in June 2010, November 2010 and January 2011 • Regional workshops held by DNOs

  20. How the requirements were addressed 12 May 2011 20 | Energy Networks Association – CMG • Caps and collars for network use factors introduced following sense checking of final charges • Some variation from current charges inevitable following the introduction of the new common charging methodology • DNOs believe these changes are justifiable given the objectives of encouraging efficient network investment • Open governance mechanism allows stakeholders to propose changes to the methodology

  21. In summary 12 May 2011 21 | Energy Networks Association – CMG • DNOs submitted their proposals for the EDCM on 1 April 2011 • The DNOs believe that the proposals have met the requirements placed upon them by Ofgem • Ofgem intend to consult on these proposals shortly • DNOs will continue to engage with stakeholders and Ofgem in the mean time

  22. Summary charts 12 May 2011 22 | Energy Networks Association – CMG • Some graphs showing comparative summary statistics on the EDCM across all DNO areas • Overall recovery from demand and generation customers • High-level breakdown of charges • Comparative statistics on the application of FCP and LRIC charges

  23. Overall EDCM revenue 12 May 2011 23 | Energy Networks Association – CMG

  24. EDCM customer numbers 12 May 2011 24 | Energy Networks Association – CMG

  25. Breakdown of demand charges 12 May 2011 25 | Energy Networks Association – CMG

  26. Breakdown of generation charges 12 May 2011 26 | Energy Networks Association – CMG

  27. Distribution of LRIC/FCP charges 12 May 2011 27 | Energy Networks Association – CMG

  28. Distribution of LRIC/FCP charges 12 May 2011 28 | Energy Networks Association – CMG

  29. Distribution of LRIC/FCP charges 12 May 2011 29 | Energy Networks Association – CMG

  30. Overview of the model (1)

  31. Overview of the model (2)

  32. Practical demonstration of the EDCM model 12 May 2011 32 | Energy Networks Association – CMG • Structure of the Excel model • Input data tables • Sheet 11 contains DNO-wide parameters • Sheet 913 (in LRIC) and 911 in (FCP) contains locational LRIC or FCP prices for each location • Sheet 953 contains data on each customer (or each “tariff”) • Tariff tables

  33. EDCM submission workshop 12 May 2011 EDCM Potential Volatility Andrew Pace 33 | Energy Networks Association

  34. Sources of Volatility 12 May 2011 34 | Energy Networks Association • Internal - Inputs which a customer can influence and have a direct impact on their charge: • Consumption in the super-red timeband (for demand customers) • Maximum Import/Export Capacity (demand & generation customers) • Units generated within the super-red timeband (generation only) • External – Inputs over which a customer has no influence, but which has an impact on their charge. • Demand on individual nodes • Network Usage Factors • DNO Allowed revenue • MEAV of Sole Use Assets

  35. Assessment of Volatility 12 May 2011 35 | Energy Networks Association

  36. Measure of Volatility (1) 12 May 2011 36 | Energy Networks Association • Every customer has a baseline charge (Illustrative 2011/12 EDCM charge used in EDCM submission) and a charge under each scenario. • The 2 measures of volatility used are: • The maximum charge across all 8 scenarios as a % of the baseline • The minimum charge across all 8 scenarios as a % of the baseline

  37. Measure of Volatility (2) 12 May 2011 37 | Energy Networks Association

  38. Impact Analysis - Demand 12 May 2011 38 | Energy Networks Association – CMG

  39. Impact Analysis - Demand 12 May 2011 39 | Energy Networks Association

  40. Impact Analysis - Generation 12 May 2011 40 | Energy Networks Association

  41. Impact Analysis - Generation 12 May 2011 41 | Energy Networks Association

  42. Typical EDCM Variance 12 May 2011 • These percentages represent the average lowest and highest charge compared to the baseline charge • Provides an indicative range, but charging volatility will vary between customers. 42 | Energy Networks Association

  43. Additional information 12 May 2011 43 | Energy Networks Association • Confidentiality Issues - Summary document (appendix 5) available on ENA website - Individual Customer information provided to Ofgem - DCUSA mod in progress (DCP91) – submitted in April 2011. • 5 year estimate of charges provided to Ofgem - Derived by changing allowed revenue • Long Term Products - Discussed within Workstream C

  44. EDCM submission workshop 12 May 2011 Lunch 44 | Energy Networks Association

  45. EDCM submission workshop 12 May 2011 Managing your charges Shankar Rajagopalan Reckon LLP (ENA/CMG consultant) 45 | Energy Networks Association

  46. Tariff structure - Demand 12 May 2011 46 | Energy Networks Association – CMG

  47. Tariff structure - Generation 12 May 2011 47 | Energy Networks Association – CMG

  48. Demand tariff drivers 12 May 2011 48 | Energy Networks Association – CMG Maximum import capacity (kVA) Energy used during the DNO super-red time band (kWh) Location on the DNO’s network (voltage of connection, network configuration) LRIC or FCP charges at the location of connection Value of sole use assets (MEAV) Reactive power flows (indirectly) And finally, all of the above for other customers

  49. Generation tariff drivers 12 May 2011 49 | Energy Networks Association – CMG Maximum export capacity (kVA) Energy produced during the DNO super-red time band (kWh) LRIC or FCP charges at the location of connection Value of sole use assets (MEAV) Reactive power flows (indirectly) Again, all of the above relating to other customers

  50. Managing your charges 12 May 2011 50 | Energy Networks Association – CMG • Use of system charges are not usually charged to the end-user (except CVA sites) • The charges in relation to most end-users are charged to their registered supplier • The Supplier/end-user decides how these charges are met by the end-user • Subject to this caveat, there are some things that an end-user can do to manage use of system charges

More Related