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PROJECT NEXUS FUNDING – THE CUSTOMER’S VIEW

PROJECT NEXUS FUNDING – THE CUSTOMER’S VIEW. Stefan Leedham 30 April 2009. GDPCR DECISION. Introduced User Pays but “little industry appetite for any significant change such a short time after GDN sales” Core Services:

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PROJECT NEXUS FUNDING – THE CUSTOMER’S VIEW

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  1. PROJECT NEXUS FUNDING – THE CUSTOMER’S VIEW Stefan Leedham 30 April 2009

  2. GDPCR DECISION • Introduced User Pays but “little industry appetite for any significant change such a short time after GDN sales” • Core Services: “Regulated services that it is appropriate to fund using price control allowed revenues.” • User Pays Services: “Regulated services that it is appropriate to fund using charges levied directly upon the user(s) requesting the service” • Core Services includes UK Link Replacement “xoserve has been funded for their existing services including the replacement of UK Link on a like-for-like basis”

  3. GDPCR FUNDING IMPACT • ALLOWED REVENUE • ≠ • PRESCRIBED EXPENDITURE

  4. LIKE FOR LIKE AKA AS IS • The same computers – Amstrad or Spectrum? • No benefit from technological advances • Limited ability to cope with future developments • Ofgem’s objective in GDPCR: “provides a cost effective opportunity for the industry to rationalise and put in place revised systems that are fit for purpose” • The same service – no room for Smart Metering or AMR? • No ability to cope with future developments • Does not meet Shippers’ requirements • Need to facilitate Energy Act requirements?

  5. WHO PAYS? • Shippers and Consumers always pay – either through User Pays or Transportation Charges • Some Examples: • Technology allows Sites and Meters to either accept Daily Reads for all sites or individual reconciliation • The industry wants both • Which one is User Pays and why? • Individual Reconciliation extended to SSP • For LSP sites this is a core service • For SSP sites this is User Pays – why? • Potential to create a perverse incentive? • What happens if SSP threshold reduced?

  6. PROPOSED APPROACH • Project Nexus is funded • Majority of funding through allowed revenue • Simple solution • Coincides with next GDPCR • Less contentious • Maintains current arrangements • Less costly • User Pays for services where: • Clear ability for Shipper to choose service • No significant commercial advantage from taking service on the day • Clear benefit over current arrangements

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