EDCM Workshop

•Workstream C Update

•Andy Pace - Chair

10 November 20101 | Energy Networks Association

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

WSC – CDCM (1)

CDCM areas of work:• Annual Review Pack • CDCM volatility assessment• User guide detail in to DCUSA• Reduction of volatility• Method M

37th October 2010

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 16th Nov for comment

47th October 2010

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.

57th October 2010

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.

67th October 2010

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

77th October 2010

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

87th October 2010

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 26th 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.

97th October 2010

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.

107th October 2010

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

117th October 2010

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

127th October 2010

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

137th October 2010