Energy Network Charging Policy The Small Print

16th November 2016

Introduction

PCMG =

cost analysis &

recovery consultants

Martin Chitty

Director – Energy

Analysis at PCMG

Contracted with half

of the UK’s 30 largest

energy users

Specialists in

understanding and

challenging

regulatory policy and

charging

methodologies

£12 million

electricity & gas

cost recoveries every

year

Part of Ayming Group,

global business

performance

consulting firm with

1,300+ employees

Network charges are rising each year – they are more relevant than ever.

Dig deeper - you can no longer afford to ignore these charges.

Network Charges

Electricity Bill

Commodity

Distribution Losses

Transmission Losses

DUoS

TNUoS

BSUoS

RO

FIT

CFD

Elexon

AAHEDC

Capacity Market

CCL

28%

44%

DUoS – How Does It Work?

Electricity Bill

DNO

Charging

Statements

Distribution

Code

DCUSA

Electricity

Distribution

License

Supplier – DNO Relationship

Reporting Requirements

Charging Methodologies

Service Levels

Connection Agreements

DCUSA – Distribution & Connection

Use of System Charging Agreement

Charging Methodologies

Changes to the DCUSA

DCMF MIG

DCP Working Group

Consultation

DCUSA Panel

Ofgem Approval

Current / Recent Changes

DCP 274 – The Application of Export Capacity

Charges in the EDCM

DCP 268 – DUoS Charging Using HH Settlement

Data

DCP 243 – Treatment of Customer Contributions in

the CDCM

DCP 228 – Revenue Matching in the CDCM

DCP 227 – Removing the inconsistency in the

application of Peaking Probabilities in the CDCM

DCP 222 - Non billing of excess Reactive Power

charges

DCP 161 – Excess Capacity Charges

DCP 138 – Implementation of alternative network

use factor (NUF) calculation method in EDCM

29 Change

proposals currently open

35 Average change proposals raised

annually

In detail: DCP 228

DCP 228 – Revenue Matching in the CDCM

Status: Approved, awaiting implementation date

Changes how network running costs are allocated into tariffs

For HH supplies the impact is a reduction of ‘Red’ costs and an increase in

‘Amber’ and ‘Green’ costs

Impact differs by region, but overall it’s an increase in DUoS costs for non-

domestic customers

Potentially undermines demand response activities

P272 will mean more customers are impacted

In detail: DCP 228

EXAMPLE – Food Manufacturer

£1.1 million p/a electricity spend, based in South West England

Currently reducing consumption at peak times to avoid

‘Red’ DUoS costs

50% consumption reduction at ‘Red’ times = £71,000

annual saving

Projected impact of DCP 228:

Red tariff reduced from 19p -> 6.5p/kWh

Saving from consumption reduction reduced to £24,000 – no longer viable

due to operational impact

Accompanied by overall DUoS cost increase

Total cost increase = £92,000 per annum (8.3%)

In detail: DCP 227

DCP 227 – Removing the inconsistency in the application of

Peaking Probabilities in the CDCM

Status: Approved, expected implementation date 01/04/2017

Changes the assumptions that are used when tariffs are calculated

Will generally result in a cost increase for customers

DUoS cost increase ranges from 1% - 16% depending on region and DUoS tariff

Particularly significant impact on 03 profile NHH sites in some regions

Typical increase ~3%

In detail: DCP 161

DCP 161 – Excess Capacity Charges

Status: Approved, expected implementation date 01/04/2018

Currently, in any month the higher of the maximum demand and available

capacity is billed

This change means there will soon be penalties for any kVA used over and

above the available capacity

Excess charge is likely to be x1.5 – x2 but may be up to x3 in some parts of the

country

Impacts to energy users:

Increases the risk associated with available capacity reductions

Boosts the business case to increase capacity levels where they are being

exceeded

Energy users need to keep a closer eye on their maximum demands /

available capacities

Getting Involved & Making

Your Voice Heard

Sign up to and monitor the DCUSA website – www.dcusa.co.uk

Attend DCMF / DCMF MIG meetings.

Engage with DCP consultations.

EDCM customers – ask for and validate your charging model inputs!

Work with a company who is directly involved in the regulatory process.

How can you make

your voice heard in

terms of industry

changes that may

impact you?

How can you gain an

understanding of

future changes to

understand how they

will impact on your

forecasts?

How can you raise

concerns with DUoS

charging

methodologies?

Thank You.