1. Structure of electricity distribution charges Ofgem workshop 15 th July 2003 A retail market perspective Rodney Brook

2. Aretail market perspective l Ofgem’s Initial Conclusions document s Supply-related issues l Retail context s Market developments s Implementation s DPR4

3. Ofgem’s Initial Conclusions l Getting to grips with new and old issues l Principles l Decision will have a material impact on suppliers l Impact on financial planning, cash-flow, P&L l Micro-generation of special interest

4. Retail context Supplier Customers £1.2bn Energy/ Risk Management Transmission Other Distribution £350m

5. Electricity competition l Choice made on perception of price, service, brand, added-value l Domestic market competitive but not mature l Pricing strategies l Economic purity and market reality

6. Cost reflectivity l Are costs understood? l How can costs be reflected in charges? l What happens when costs are reflected to the supplier or the customer? l Do the billing processes work?

7. Perspectives on distribution charges Retailers Customers/segments Products/services Relationships/contracts Competition and market environment Costs Charging regimes and operations Distributors Voltage Delivery/services Location Urban/rural Entry points Revenues

8. Distribution services Retailer UoS MPAS Metering Repairs Fault-call handling Additional load Connections Customer Developer ?

9. Charging structures and DPR4 l To what extent are suppliers involved? l What about cost-reflectivity? l How will improvements be introduced, in the context of other structural changes?