05 July 2010 EDCM Stakeholder Workshop. © 2007 E.ON Agenda Background and timeline Overview CDCM / EDCM boundary Locational charging and FCP Pricing model.

05 July 2010

EDCM Stakeholder Workshop

© 2007 E.ON

Agenda

• Background and timeline• Overview• CDCM / EDCM boundary• Locational charging and FCP• Pricing model• EDCM Prices• Key consultation issues• Future developments

10 April 2023, E.ON, Page 2

Background and timeline

© 2007 E.ON

CDCM

• CDCM jointly developed by DNOs, with stakeholder input

• Implemented April 2010• Covers all LV and HV charges• DNOS working to satisfy condition relating

to treatment of generator dominated areas• In the event, Central Networks required no

derogations• No issues with CDCM billing• Procuring new combined HH/NHH billing

system for 2011


© 2007 E.ON

EDCM

• Will cover EHV charges from April 2011 (subject to approval)

• Licence requires EDCM submission by 1 September 2010

• Within EDCM, DNOs have option of either LRIC or FCP• CMG has established three workstreams:

WSA – ‘Network modelling’WSB – ‘Pricing modelling’WSC – ‘Price stability’

• Some stakeholders in workstreams – more welcome!• Project Manager and Technical Consultants in support• See ENA website for info:

http://2010.energynetworks.org/edcm/


http://2010.energynetworks.org/edcm/

© 2007 E.ON

Pre-April 2005 generation

• Generation connection rules changed from ‘deep’ to ‘shallowish’ from April 2005

• Pre-April 2005 generation not charged export use of system

• DPCR5 removes dispensation not to charge from April 2010

• CDCM ‘charges’ (credits) HV and LV generation• Ofgem pushing DNOs to implement interim EHV

charging arrangements in 2010/11• Central Networks has proposed modified version

of methodology for post-April 05 generation:No pass through of 80%No £1 per kW incentive£1 per kW O&M (unless paid ‘up front’)No charge where no legal right to charge


© 2007 E.ON

EDCM timeline

13 July – Ofgem boundary consultation closes16 July – Joint DNO consultation closes July/August – DNOs consider responses and

modify as neededBy 1 September – DNOs submit EDCM proposals

to Ofgem October/November – Ofgem consultationNovember/December – Authority decisionAssuming no veto:Late December – DNOs’ publish ‘indicative’ tariffsBy 19 February 2011 – Final tariffs confirmed1 April 2011 – EDCM tariffs become effective


Overview

© 2007 E.ON

Charging Model Overview (1)


© 2007 E.ON



© 2007 E.ON



© 2007 E.ON



EDCM / CDCM Boundary

© 2007 E.ON

The Current Boundary

• CDCM applies to customers supplied at less than 22 kV, except those currently under site-specific arrangements

• If the licence is not changed, EDCM will apply to all customers above 22 kV (class A), and to all HV customers currently under site-specific arrangements (class B)


© 2007 E.ON

ENA Boundary Consultation

• WSB has consulted on possible changes to the boundary

• Summary of responses published at http://2010.energynetworks.org/edcm

• The DNOs’ preference was for a 22 kV “raised” boundary


http://2010.energynetworks.org/edcm

© 2007 E.ON

ENA Boundary Consultation – no change assumed!• The prices in the EDCM consultation

document assume no change

• Model includes current site-specific customers

• Any change to the boundary would require re-running the models and could materially affect prices for all customers


© 2007 E.ON

Raised Boundary

• Would move class B customers from current site-specific arrangements to the CDCM

• These customers would be removed from the EDCM modelling

• Will affect charges for all demand customers, including class A customers


© 2007 E.ON

Lowered Boundary

• Would move some CDCM customers (in class C) from the CDCM to the EDCM

• These customers would be added to the EDCM modelling

• Will affect charges for all demand customers, including class A and B customers


© 2007 E.ON

Ofgem’s Consultation

• Ofgem has proposed a number of options

• Some options would combine raising the boundary (excluding some class B customers) and lowering the boundary (including some class C customers)

• Any change would require a modification to the distribution licence conditions


© 2007 E.ON

Ofgem’s Impact Assessment

• Implementing any boundary change would involve re-running the whole EDCM model and affect all prices for all EDCM customers

• Illustrative prices that have been published do not apply to all boundary options

• Actual price impact of boundary changes could be quite different


© 2007 E.ON

EDCM / CDCM Boundary – Next steps

• The illustrative charges in the EDCM consultation document are likely to change

• These changes will be affected by the outcome of the boundary consultation

• Submission in September will reflect the boundary in the licence at that time


Locational charging and FCP

© 2007 E.ON

What is EHV ‘locational’ pricing?

• Valuation of spare capacity

• Tariffs vary by point of connection

• Reflects levels of utilisation of network assets

• Benefits:• Connections where there is spare capacity

• Demand-side management

• Price signals to distributed generation

• Economically efficient network reinforcement


© 2007 E.ON

Forward Cost Pricing (FCP)

• Network studies• Analysis based on a ‘zonal’ approach (network groups)

• Network resilience over a 10-year period assessed

• Reinforcements due to load AND generation identified – only thermal capacity

considered

• Load and generation treated differently

• Load analysis• ‘Peak’ and ‘Maintenance’ scenarios assessed for each year

• Earliest year in which each asset requires reinforcement identified

• Generation analysis• Single analysis (minimum loads, maximum output from existing generation)

• Hypothetical generators ‘connected’ to test resilience

• Additional generation that can be connected before overloads occur estimated


© 2007 E.ON

FCP – distribution network analysis

Demand

Generation


Peak Demand Analysis•N-1 contingencies•Diversified winter loads•Winter asset ratings•‘Secure’ generation output

Summer Demand Analysis

•N-2 contingencies•Diversified summer peak loads•Summer asset ratings•‘Secure’ generation output

Reinforcement•Identify reinforcement•Identify timing

Most Onerous Regime

•Identify timingReinforcement

•Identify reinforcement•Identify timing

TSG Analysis•N-1 contingencies•Diversified summer min. loads•Summer asset ratings•Maximum generation output•Test size generator

overload?

Headroom Analysis

•Generator increments•Identify reinforcement

NO

YES

© 2007 E.ON

Typical FCP cost recovery profile

T-10 T-9 T-8 T-7 T-6 T-5 T-4 T-3 T-2 T-1


© 2007 E.ON

Derivation of network group prices


© 2007 E.ON

Original FCP generation principles

• Prediction of sizes and locations of future connections difficult

• ‘Test size generators’ used to simulate effect of lumpy connections

• ‘Test size generators’ derived from existing plant profile – 85 th percentile

• ‘Connected’ to ‘principal’ substation in each network group

• Headroom assessment pricing• No price if TSG does not cause any overloads

• ‘Incremental’ generator increased until overload – price based on headroom

• Aimed more at assessing fault level costs• Generator driven costs dominated by switchgear (fault level)


© 2007 E.ON

Improvements to FCP generation principles


Original Methodology Improved Methodology

Size TSGs derived from existing generation plant profile

TSGs derived from existing generation plant profile AND accepted offers

[TSG sizes linked to future connections]

Connection points

TSGs ‘connected’ to ‘principal’ substation

TSGs ‘connected’ to ‘principal’ substation AND network group perimeter

[Circuits explicitly tested]

‘Probabilities’ used in pricing

‘Probability’ derived from total test and forecast generation for each voltage level

‘Probability’ extended to incorporate multiple tests in each network group

[Recognition that an asset may be overloaded by multiple tests within same network group]

© 2007 E.ON

‘Test Size Generator’ size profiles


Original Methodology Improved Methodology

Voltage(kV)

CN East CN West Voltage(kV)

Substation

Circuit

132 333 88 132 100 100

33 23 46 33 51 23

11 4 6 11 6

© 2007 E.ON

TSG connection point – original methodology


© 2007 E.ON

TSG connection points – improved methodology


© 2007 E.ON

Central Networks’ FCP outputs

• All prices indexed against estimated reinforcement costs

• Reinforcements validated against our 10-year network plan and ‘watch’ list


© 2007 E.ON

‘Locational’ prices for selected 132kV network groups


Willington:L: £1.54G: £0.00

Ratcliffe-on-Soar:L: £3.41G: £0.00

Drakelow:L: £0.00G: £0.00

Enderby:L: £0.00G: £0.91

© 2007 E.ON

‘Locational’ prices for selected 33kV network groups


Willington:L: £1.54G: £0.00

Drakelow:L: £0.00G: £0.00

Burton:L: £0.00G: £1.71

Burton South:L: £0.00G: £0.00Gresley:L: £0.00G: £1.63

Heanor:L: £1.58G: £1.61

Stanton:L: £1.54G: £1.25

Spondon:L: £1.54G: £0.49

Derby:L: £5.18G: £0.71

Derby South:L: £1.78G: £0.00Uttoxeter:L: £5.13G: £1.73

Pricing model

© 2007 E.ON

Key Inputs

• Customer dataset• Capacity, peak-time consumption, generated units forecast, etc.

• FCP or LRIC dataset• Charge 1, charge 2, gross kW and kVAr flows in maximum and minimum demand scenarios

• DNO data: revenue, CDCM model assets, …


© 2007 E.ON

Overview of the application of charge 1 and charge 2


Charge 1 Charge 2

Import MPAN

Charge to import capacity or peak-time demand

Billed as p/kVA/day

Nothing

Export MPAN

Generation credit based on F factor

Billed as p/kWh

Export capacity charge

Billed as p/kVA/day

© 2007 E.ON

Component of Demand Tariffs


Component Driver Applied by

Sole use Sole use asset MEAV

Fixed charge

Charge 1 Capacity/peak-time consumption

Capacity charge

Exit Peak-time consumption

Capacity charge

Scaling – peak-time

Peak-time consumption

Capacity charge

Scaling – capacity

Capacity Capacity charge

© 2007 E.ON

Breakdown of Demand Tariffs – By DNO


(£5m) £5m £15m £25m £35m

CE NEDL

CE YEDL

CN East

CN West

EDFEN EPN

EDFEN LPN

EDFEN SPN

ENW FCP

ENW LRIC

SPEN SPD

SPEND SPM

SSEPD SEPD

SSEPD SHEPD

WPD Wales FCP

WPD Wales LRIC

WPD West FCP

WPD West LRIC

Sole use assets

Charge 1

Transmission exit

Scaling: peak-time consumption

Scaling: capacity

© 2007 E.ON

Component of Generation Tariffs



Sole use if applicable

Sole use asset MEAV

Fixed charge

Charge 1 Units exported

Unit credit

Exit (non generation dominated)

Units exported

Unit credit

Exit (generation dominated)


Charge 2 Capacity Capacity charge

© 2007 E.ON

Breakdown of Generation Charges & Credits – By DNO


(£5m) £5m £15m £25m £35m

CE NEDL

CE YEDL

CN East

CN West

EDFEN EPN

EDFEN LPN

EDFEN SPN

ENW FCP

ENW LRIC

SPEN SPD

SPEND SPM

SSEPD SEPD

SSEPD SHEPD

WPD Wales FCP

WPD Wales LRIC

WPD West FCP

WPD West LRIC

Charge 1 credits

Transmission exit credits

Charge 2 charges

Transmission exit charges

© 2007 E.ON



© 2007 E.ON

Charge 1 - Demand

• Charge 1 comes from the load flow modelling

• Applied to agreed capacity for network group to which customer is connected

• Applied to demand at time of peak for parent or grandparent groups

• Note: for CN ‘time of peak’ or ‘super red’ time band is 16.00 to 19.00, Mon-Fri, Nov-Feb


© 2007 E.ON

Worked Example – Charge 1 Demand

• Location – Derby South BSP• FCP charge 1: £0.24/kVA/yr• Applied to Agreed Capacity: 27,000 kVA• Charge: 27,000 x £0.24 = c. £6,000

• Parent Location – Willington GSP• FCP charge 1: £1.54/kVA/yr• Applied to Peak Time Consumption: c. 15,000 kVA

• Charge: 15,500 x £1.54 = c. £23,000

• Applied as a charge to agreed capacity• Charge = (£0.24 + 1.54*15000/27000) = £1.10/kVA/yr

• £1.10/kVA/yr = 0.3p/kVa/day 10 April 2023, E.ON, Page 45

© 2007 E.ON

Charge 1 - Generation


• Credit (p/kWh) if generator supports the network

• Intermittent generation deemed not to support

• Applied throughout the year (not in super red)


© 2007 E.ON

Worked Example – Charge 1 Generation

• Location – Derby South BSP• FCP demand charge 1: £0.24/kVA/yr• Convert to generation credit:

• Non Intermittent: 0.24 x 100 / 8760 x 1 = 0.0027p/kWh

• Intermittent: 0.24 x 100 / 8760 x 0 = 0.0000p/kWh• Applied to Output (kWh): 290,000,000 kWh• Credit: 290,000,000 x 0.0027p = c. £8,000

• Parent Location – Willington GSP• FCP charge 1: £1.54/kVA/yr• Convert to generation credit:

• Non Intermittent: 1.54 x 100 / 8760 x 1 = 0.0176p/kWh

• Intermittent: 1.54 x 100 / 8760 x 0 = 0.0000p/kWh• Applied to Output (kWh): 290,000,000 kWh• Credit: 290,000,000 x 0.0176p = c. £50,000


© 2007 E.ON

Charge 2 - Generation


• Applied to agreed capacity for network group to which customer is connected

• Applied to agreed capacity for parent or grandparent groups


© 2007 E.ON

Worked Example – Charge 2 Generation

• Location – Stony Stratford BSP• FCP charge 2: £1.81/kVA/yr• Applied to Agreed Export Capacity: 15,000 kVA• Charge: 15,000 x £1.81 = c. £27,000

• Parent Location – East Claydon GSP• FCP charge 1: £0.00/kVA/yr• Applied to Agreed Export Capacity: 15,000 kVA• Charge: 15,000 x £0.00 = c. £0

• Applied as a charge to agreed capacity• Charge = (£1.81 + £0.00) = £1.81/kVA/yr• £1.81/kVA/yr = 0.5p/kVa/day


© 2007 E.ON



© 2007 E.ON

Demand Tariffs

• Sole use asset charge• Fixed charge (p/day)• Proportional to modern equivalent asset value

• Based on direct costs only

• Transmission exit• All expressed as capacity charges (p/kVA/day)

• Charge rate reflects peak-time consumption


© 2007 E.ON



© 2007 E.ON

Demand Scaling (1)

1. Apportion allowed revenue between voltage levels on basis of MEAVs

2. Split EHV portions (and cost of generation credits) between EDCM customers and CDCM customers on basis of demand

• At voltage level of connection use agreed capacity for EDCM customers

• At higher voltage levels use demand at peakThis gives the EDCM Demand pot

3. Subtract demand charge 1, sole use, transmission exit and add back generation credits to give required scaling amount


© 2007 E.ON

Demand Scaling (2)

4. Required scaling amount divided by sum of agreed capacities and estimated peak time consumption of all EDCM demand customers giving a single £/kVA/year fixed adder

5. Fixed adder applied to agreed capacity and estimated peak time consumption of each EDCM user.

Between 2 otherwise identical customers:• The one with the higher agreed capacity will pay

more in scaling• The one with the highest peak time consumption

will pay more in scaling


© 2007 E.ON

Demand Scaling – IllustrationScaling Revenue Required: £60,000


Ben Nevis Snowdon

Forecast Agreed Capacity 20,000 20,000

Historic Peak time consumption as a proportion of agreed capacity

18,000 2,000

Scaler calculation 60,000 / (20,000 + 18,000 + 20,000 + 2,000)

= £1/kVA/yr

Scaler £1/kVa/yr £1/kVA/yr

Scaling calculation 1 x (20,000 + 0.9 x 20,000)

1 x (20,000 + 0.1 x 20,000)

Scaling allocation £38,000 £22,000

© 2007 E.ON

Demand Scaling Options vs current demand charges


Current demand charges£ million

Option 14 demand charges£ million




CE NEDL 4.6 5.5 No data 2.1 6.1CE YEDL 4.4 4.8 No data 1.8 4.2CN East 5.5 3.5 2.8 2.0 3.0CN West 1.7 2.1 1.0 1.2 1.7EDFEN EPN 6.5 6.4 1.3 2.6 5.0EDFEN LPN 5.4 10.4 2.2 5.3 8.3EDFEN SPN 10.8 8.2 1.9 2.3 4.5

ENW 6.7 3.8FCP: 3.7

LRIC: 1.81.4 2.5

SPEN SPD 4.8 4.3 3.7 1.8 3.9SPEN SPM 8.2 9.0 8.8 4.7 7.5SSEPD SEPD 14.7 13.1 15.7 9.3 9.5SSEPD SHEPD 1.8 1.1 4.0 0.7 0.8

WPD Wales 9.8 15.6FCP: 10.2LRIC: 8.4

6.7 14.1

WPD West 1.6 2.1FCP: 1.8

LRIC: 1.41.3 1.7

Total 86.3 90.0 43.0 72.9

© 2007 E.ON

Generation Scaling

• No scaling applied to Generation Credits

• Currently proposed no scaling applied to Generation Charges, but options being discussed:• Add £1/kW/yr to cover O&M• calculate scaler for post 2005 DG targeting

post 2005 DG allowed revenue and apply scaler to all DG


© 2007 E.ON



EDCM prices

© 2007 E.ON

CNE tariff Movements


© 2007 E.ON

CNE tariff Movements


© 2007 E.ON

Component of Demand Tariffs



Sole use Sole use asset MEAV

Fixed charge

Charge 1 Capacity/peak-time consumption

Capacity charge

Exit Peak-time consumption

Capacity charge

Scaling – peak-time

Peak-time consumption

Capacity charge

Scaling – capacity


© 2007 E.ON

Breakdown of Demand Tariffs – By DNO


(£5m) £5m £15m £25m £35m

CE NEDL

CE YEDL

CN East

CN West

EDFEN EPN

EDFEN LPN

EDFEN SPN

ENW FCP

ENW LRIC

SPEN SPD

SPEND SPM

SSEPD SEPD

SSEPD SHEPD

WPD Wales FCP

WPD Wales LRIC

WPD West FCP

WPD West LRIC

Sole use assets

Charge 1

Transmission exit

Scaling: peak-time consumption

Scaling: capacity

© 2007 E.ON

Breakdown of Demand Tariffs – By Customer - CNE


© 2007 E.ON

Breakdown of Demand Tariffs – By Customer - CNW


© 2007 E.ON

Component of Generation Tariffs



Sole use if applicable

Sole use asset MEAV

Fixed charge

Charge 1 Units exported

Unit credit

Exit (non generation dominated)

Units exported

Unit credit

Exit (generation dominated)


Charge 2 Capacity Capacity charge

© 2007 E.ON

Breakdown of Generation Charges & Credits – By DNO


(£5m) £5m £15m £25m £35m

CE NEDL

CE YEDL

CN East

CN West

EDFEN EPN

EDFEN LPN

EDFEN SPN

ENW FCP

ENW LRIC

SPEN SPD

SPEND SPM

SSEPD SEPD

SSEPD SHEPD

WPD Wales FCP

WPD Wales LRIC

WPD West FCP

WPD West LRIC

Charge 1 credits

Transmission exit credits

Charge 2 charges

Transmission exit charges

© 2007 E.ON

Breakdown of Generation Tariffs – By Customer - CNE


© 2007 E.ON

Breakdown of Generation Tariffs – By Customer – CNW


© 2007 E.ON

Importance of Demand Profile


0

2,000

4,000

6,000

8,000

10,000

12,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47

Demand profile - cust 1

0

2,000

4,000

6,000

8,000

10,000

12,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47

Demand Profile - cust 2

Illustrative Charges: Cust 1: £200,000 Cust 2: £200,000

Charges if same profile as cust 2: Charges if same profile as cust 1:Cust 1: £270,000 Cust 2: £140,000

Key consultation issues

© 2007 E.ON

Key consultation issues

• Power flow modelling• Pre-April 2005 generation• Charge 1 for demand• Demand/generation side management• Generation credits• Generation charges• No demand credits• Negative charges• Transmission exit charges• Sole use asset charges• Generation scaling• Demand scaling options• Tariff components• Interconnected networks• Volatility


Future developments

© 2007 E.ON

Future Developments

• The Distribution Charging Methodology Forum will be the place where ideas relating to charging are discussed and developed

• Changes arising from this will become the subjects of formal modification proposals under DCUSA governance

• DCUSA parties can raise modification proposals• Other materially affected parties can also raise

modification proposals, with the Authority’s approval

• The future of charging is in your hands!


05 July 2010

EDCM Stakeholder Workshop

Thank You – Safe Journey Home!

05 July 2010 EDCM Stakeholder Workshop. © 2007 E.ON Agenda Background and timeline Overview CDCM / EDCM boundary Locational charging and FCP Pricing model.

Documents

edcm cdcm boundary slide

overview slide

cdcm customers

fcp slide

timeline slide

edcm modelling

ofgem boundary consultation

cdcm cdcm