structure of electricity distribution charges welcome and introduction
DESCRIPTION
Structure of Electricity Distribution Charges Welcome and Introduction. Charles Gallacher Deputy Director, Scotland. Format and objectives. Main purposes of the workshop: -overview of Ofgem’s June 2003 consultation ‘Structure of electricity distribution charges: Initial conclusions’ - PowerPoint PPT PresentationTRANSCRIPT
July 2003
Structure of Electricity Distribution ChargesWelcome and Introduction
Charles GallacherDeputy Director, Scotland
July 2003
Format and objectives
Main purposes of the workshop:- overview of Ofgem’s June 2003 consultation ‘Structure of electricity distribution charges: Initial conclusions’ - facilitate open debate about the future of the project- opportunity for wider audience to influence the debate
London workshop held 15 July
July 2003
Agenda
10.40Structure of electricity distribution charges – Proposals and implementation
James Richardson 11.00DPCR 4 and incentives for distributed generation
Martin Crouch 11.15Q&A session 12.00Lunch 12:45Workgroup session 15:00 Close
July 2003
Workgroup Session
Connection charging issues Introducing generator distribution use of system
(GDUoS) charges Change management and co-ordination Impact of proposals on Scotland AoB
July 2003
Promoting choice and value for all gas and electricity customers
July 2003
Structure of Electricity Distribution ChargesProposals and Implementation
James RichardsonDistribution Policy Team
July 2003
Introduction
Background
June 2003 ‘Initial conclusions’ document – key proposals
Links with other work
Implementation
July 2003
Background
The structure of charges project has three key aims:
To review the charging principles established by the Electricity Council in the early 1980s;
To establish a transparent and consistent boundary between connection and use of system charges for all network users; and
To establish a robust framework for generator distribution use of system (‘GDUoS’) charges.
July 2003
Background - continued
December 2000 – initial consultation document setting out the main background and key themes
March 2002 – proposals on interim measures for DG October 2002 – structure of charges update document February 2003 – industry workshop June 2003 – ‘Initial conclusions’ document
July 2003
Background - continued
Workshops - 15 July in London- 24 July in
Glasgow
Responses to June 2003 document requested by 8 August
Project enters ‘implementation’ stage
July 2003
15 July London Workshop - key outcomes
- Review has delivered sound proposals- Now is the time to move from ‘Review’ to
‘Implementation’
Major challenges:- Designing and implementing GDUoS regime- Timescales: introducing SoC proposals by April 2005
July 2003
‘Initial conclusions’ document
Key themes: Charging principles Charging methodologies Connection boundary Use of system Transitional arrangements Implementation Regulatory impact assessment
July 2003
‘Initial conclusions’ document
Charging principles October 2002 document proposed that common charging
principles should be recognised and applied across similar networks:- cost reflectivity;- simplicity;- ease of implementation;- transparency; and- predictability
Responses to the document supported these principles
July 2003
‘Initial conclusions’ document
Charging methodologies June document proposes that DNOs should be required by
licence to set out a methodology that:- facilitates competition in the generation, transmission, distribution and supply of electricity;- leads to changes which, as far as reasonably practicable (taking into account implementation costs and the impact on competition) reflect the costs and benefits incurred by DNOs in such a way as to encourage efficient decisions by network users; and- is capable of evolution over time to reflect changing network characteristics and commercial arrangements
July 2003
‘Initial conclusions’ document
Connection Boundary Previous consultation responses have indicated strong support
from industry for: - common boundary applying to all connections- shallower connection charges for DG
Guided by the common principles, the June document proposes:- ‘shallow’ charges for EHV (33kV and above) connections and locationally varying use of system tariffs- ‘shallowish’ charges for HV and LV (less than 33kV) connections – retaining locational signals – and simple use of system tariffs
July 2003
Boundary with transmission network
Boundary with connectee
Transformer
Transformer
Transformer
Transformer
HV
LV
Full cost“Deep”
Partial cost“Shallowish”
Sole user cost“Shallow”
Zero cost
New
assetsR
einforcem
ent
New
assetsR
einfor
cemen
tG
eneral system
New
assetsG
eneral system
Gen
eral system
July 2003
‘Initial conclusions’ document
Connection Boundary – Issues: Define reinforcement contribution rule for ‘shallowish’
connections- de minimis rule e.g. if connectee does not exceed 25% of
existing capacity no reinforcement contribution- when de minimis rule exceeded:
- connectee charged for the proportion it uses of marginal increase in capacity?
- connectee charged for the proportion it uses of the total capacity?
- other? Need for contribution rules for other impacts e.g. upon fault
level? Abolish Tariff Support Allowance and Capitalised Operation &
Maintenance
July 2003
‘Initial conclusions’ document
Use of system Shallower charges will require the remainder of the connection
and O&M charges to be recovered via ongoing use of system charges
June document proposes the introduction of use of system charges for generation (‘GDUoS’)
Issues who pays – suppliers or generators? No change to the balance
except where cost reflective network services – what services should GDUoS recover? should charges reflect forward or backward looking costs?
July 2003
‘Initial conclusions’ document
Transitional arrangements Options for a transitional regime
- no exemptions after April 2005- exempt pre-existing generators for a period
of time e.g. until 2010 or for 15 years
- make pre-existing generators liable for GDUoS from April 2005, but offset the charge with a lump sum or annualised rebate of the reinforcement and capitalised O&M elements of their connection charge
- another option?
July 2003
Links with other work
DPCR4- structure of charges proposals will affect DPCR 4 decisions
Distributed Generation Co-ordination Group- joint Ofgem/DTI group that is aiming to facilitate the achievement of the Government’s targets for renewable generation and CHP
July 2003
Implementation
Important interaction with DPCR4 – structure of charges proposals scheduled to come into effect April 2005
‘Implementation Steering Group’ (ISG) to be established in August and to hold first meeting in September
Ofgem’s October 2003 ‘Initial decision’ document will firm up the proposals in the June document, and discuss the issues of GDUoS, transitional arrangements and implementation in detail
July 2003
Implementation Timetable
8 August – Responses due August 2003 – ISG formed September & October 20003 – First and second
meetings of ISG October 2003 – ‘Initial decision’ document published July 2004 – ‘Implementation update’ document
published April 2005 – new regime implemented
July 2003
Implementation Steering Group
Group to be chaired by Ofgem Aim of the ISG will be to steer the implementation
stage of the project - generating ideas, discussing proposals and making recommendations
ISG will provide a forum for discussion, but will not act as a formal decision making body and will not preclude a full consultation on the issues
Ideally group will consist of approximately 12 individuals (plus Ofgem), representing all industry sectors and representatives of all DNO groups
July 2003
Implementation Steering Group
First meeting of the group in September 2003 – Agenda
• Terms of reference• DNOs to set out proposed approach• All parties to discuss requirements of Ofgem
Second meeting in October 2003 Thereafter group to meet approximately bi-monthly Possible expert ‘sub-groups’ to support ISG Draft terms of reference given in June 2003
document
July 2003
Change and Co-ordination
Licence modifications
Introduction of GDUoS agreements?
Revised industry governance arrangements?
July 2003
Implications of the proposals on Scotland
Proposals will facilitate the development of DG in Scotland
Different network characteristics – geographically and voltage level
BETTA
July 2003
Promoting choice and value for all gas and electricity customers