17 May 2011

Generation Dominated Areas

Oliver Day

UK Power Networks(on behalf of DNOs)

1 | Energy Networks Association

Recap

Fifth condition on CDCM regarding “Generation charging in generation dominated areas” to be completed by September 2010

To meet fifth condition DNOs submitted “Generation charging in generation dominated areas” report to Ofgem on 1 September 2010

DNOs proposed to undertake a study on the issue of tariffs in generation dominated areas

Ofgem published decision on “Generation charging in generation dominated areas” condition on 14 December 2010

Further requirements including an interim report April 2011

17 May 20112 | Energy Networks Association

Meeting the extended condition

DNOs appointed Frontier Economics to undertake the study on the issue of tariffs in generation dominated areas

Frontier Economics conducted extensive analysis using DNO and other industry data

DNOs submitted Frontier Economics Report to Ofgem on 1 April 2011

DNOs and Frontier Economics met with Ofgem on 6 May 2011 to discuss the report and its conclusions

17 May 20113 | Energy Networks Association

Report Conclusions

Frontier Economics provided three conclusions to their report:

Conclusion 1- There is a strong case against introducing a complex locational charging regime that would derive tariffs for generators connected to both the HV and LV levels at a highly geographically granular level as things stand today

Conclusion 2 - There may be a case for introducing a simpler charging regime that derives some form of location based tariff for generators connecting at the HV level

Conclusion 3 - Careful consideration should also be given to any advantages and disadvantages that are more difficult to quantify

17 May 20114 | Energy Networks Association

Impact on CDCM

No requirement for ‘locational’ charges

No requirement for any changes to LV

Some CDCM changes currently being progressed impact generation

MIG001 – Commonality of 500MW model

MIG004 – Generation scaling

MIG013 – Remove single rate tariff for generators

17 May 20115 | Energy Networks Association

…at this time

Next steps

Frontier Economics drafting the ‘final’ GDA report

Report expected to propose that on balance there is no requirement to implement urgent change

This also allows for EDCM approval and some conclusion of CDCM work that is in progress

Report expected to suggest timescale for implementing initial GDA charging measures in April 2013

using the GDA benchmark as a measure for monitoring what needs to be done and when

Expected delivery before the end of June

17 May 20116 | Energy Networks Association