DNPC03 Report LDZ System Charges Capacity/Commodity Split and Interruptible Discounts

Questions for Consultation 1. Should the Charging Methodology be changed from 50/50 capacity/commodity split to 95/5 2. Should interruptible supply points pay 47.37% of the increased capacity charges 3. Should the change be made with effect from 1 April 2008 or 1 October 2008

1. Main Points Raised Not enough information provided Treatment of overhead costs Would encourage introduction of Standing Charges Runs counter to energy efficiency incentives AQ Review process may need revised Retro-fit modelling

2. Main Points Raised Discriminatory effects SOQ data Is the 47.37% cost reflective

2. Main Points Raised Derivation of the 47.37% Existing Regime Capacity Commodity Total Firm 50 100 Interruptible New Regime 95 5 45

3. Main Points Raised Align implementation date with end of the transitional arrangements, October 2011 Impact of October 2008 implementation on price changes

Impact of Oct 2008 implementation on price changes Formula Year 2008/09 Charges based on 50/50 Charges based on 95/5 Apr-Sept Oct-Mar Total F’cast Collected 98.9 123.1 222 109 113 F’cast Allowed 201 Percent Reduction 17.0% Charges based on 95/5 implemented October 2008 211.9 9.6% The percent reductions have been amended since the meeting on Monday 17/09. The slide used at the meeting calculated the percent reductions based on the full year’s revenue. In fact assuming the price change would be made on 1 October it is more representative to base the percent reduction on the October to March revenue. The revised percent changes are therefore shown above. The basic point remains unchanged. Implementing the change to 95:5 on 1 October 2008 should reduce the size of the percent reduction in the level of the charges that would otherwise be needed at that date.

Final Proposals The Charging Methodology should be changed so that capacity element the LDZ system charges is set to recover 95% of the revenue from the LDZ system charges and the commodity element set to recover 5%. Interruptible supply points should pay 47.37% of the increased LDZ capacity charge The change should be made with effect from 1 October 2008

Impact Analysis BS SOQs West Midlands Load Factor Original Change SOQ Adj Change Domestic 0-73.2 33.5% -0.4% -0.2% Firm 73.2 – 146.5 29.9% 4.6% 4.9%   146.5 – 293.1 5.1% 5.4% 293.1 – 439.6 28.4% 7.3% 7.6% 439.6 – 586.0 28.9% 6.7% 7.0% 586.0 – 732.0 29.6% 5.9% 6.2% 732 - 2198 30.3% 4.1% 4.4% 2198 - 2931 34.9% -0.6% -0.3% 2931 - 5861 35.7% -0.9% -0.7% 5861 - 14654 32.0% 4.2% 4.5% 14654 - 29307 48.0% -11.3% -11.0% 29307 - 58614 42.9% -5.8% -5.6% 58614 - 293071 54.3% -14.5% -14.3% 293071 - 1465355 89.2% -31.8% -31.6% Interruptible 27.7% 45.8% 29.4% -13.1% 26.0% 39.2% 39.6% 0.5% 48.8% 54.4% -15.0% -21.8% 45.6% 64.5% -7.7% -30.2% 42.1% 42.4% 1.6% 1.7%

Impact Analysis BS SOQs North West Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 37.2 -0,5 0.2 Firm 73.2 – 146.5 33.5 4.7 5.6   146.5 – 293.1 33.4 5.3 6.2 293.1 – 439.6 34.7 4.0 4.9 439.6 – 586.0 34.9 3.8 4.6 586.0 – 732.0 35.4 3.3 4.3 732 - 2198 34.6 3.2 4.2 2198 - 2931 39.1 -1.1 -0.1 2931 - 5861 40.6 -2.0 5861 - 14654 45.4 -6.0 -5.1 14654 - 29307 51.5 -10.4 -9.6 29307 - 58614 46.7 -5.0 -4.1 58614 - 293071 56.2 -11.9 -11.1 293071 - 1465355 100.0 -32.9 -32.3 Interruptible 15.3 43.9 113.5 -6.1 29.5 39.3 31.3 46.8 60.0 -6.6 -25.1 37.9 61.9 12.4 -24.7 53.0 58.1 -12.2 -18.4

Impact Analysis BS SOQs London Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 33.3 0.3 0.6 Firm 73.2 – 146.5 35.2 -0.1 0.2   146.5 – 293.1 35.1 0.0 0.4 293.1 – 439.6 33.6 1.8 2.1 439.6 – 586.0 34.3 1.0 1.4 586.0 – 732.0 1.3 732 - 2198 36.0 -2.0 -1.7 2198 - 2931 39.1 -4.4 -4.1 2931 - 5861 39.9 -4.7 5861 - 14654 42.2 -6.6 -6.3 14654 - 29307 46.5 -9.6 -9.3 29307 - 58614 54.3 -14.8 -14.6 58614 - 293071 64.6 -20.8 -20.6 293071 - 1465355 84.9 -29.7 -29.5 Interruptible 24.3 45.3 43.9 -12.0 27.6 46.3 33.7 -11.7 38.7 51.2 3.3 -17.4 23.4 33.2 59.0 20.8 49.4 53.3 -15.4

Impact Analysis BS SOQs East of England Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 36.0 0.0 0.3 Firm 73.2 – 146.5 32.3 5.3 5.7   146.5 – 293.1 32.1 6.1 6.6 293.1 – 439.6 33.4 4.7 5.2 439.6 – 586.0 33.8 4.3 4.8 586.0 – 732.0 34.6 3.4 3.8 732 - 2198 34.7 2.3 2.8 2198 - 2931 39.1 -1.9 -1.4 2931 - 5861 40.3 -2.4 -2.0 5861 - 14654 40.9 -1.6 14654 - 29307 50.8 -10.4 -10.0 29307 - 58614 50.6 -9.4 -9.0 58614 - 293071 45.6 -3.6 -3.2 293071 - 1465355 67.0 -17.9 -17.6 Interruptible 15.9 37.4 105.6 5.6 40.0 50.7 1.6 -16.4 41.1 52.2 0.9 -16.8 53.3 66.7 -16.3 -30.5 47.7 54.7 -4.5 -14.7

Impact Analysis BS SOQs Northern Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 35.6 -0.8 -0.6 Firm 73.2 – 146.5 29.3 5.8 6.0   146.5 – 293.1 6.4 6.6 293.1 – 439.6 33.0 2.0 2.2 439.6 – 586.0 34.3 0.4 0.6 586.0 – 732.0 33.6 1.3 1.6 732 - 2198 34.4 1.4 2198 - 2931 37.2 -0.5 -0.4 2931 - 5861 38.7 1.5 5861 - 14654 40.9 -2.2 -2.1 14654 - 29307 50.5 -8.2 -8.1 29307 - 58614 53.9 -8.6 -8.5 58614 - 293071 46.7 0.5 293071 - 1465355 96.4 -19.4 -19.2 Interruptible 32.2 48.1 22.0 -7.9 37.6 53.7 11.4 -12.0 30.2 56.6 -10.1 62.3 59.3 17.7 20.1 62.9 48.7 11.0 18.3 The revised load factors for the 58614-293071 and 293071-1465355 load bands have been corrected. They were 64.0% and 92.8% and should have been as shown above. The SOQ adjusted changes are unaffected.

Impact Analysis BS SOQs Wales and West Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 31.7 -0.1 0.0 Firm 73.2 – 146.5 29.0 -0.4   146.5 – 293.1 26.9 2.0 293.1 – 439.6 28.6 0.1 439.6 – 586.0 31.0 -2.9 586.0 – 732.0 29.6 -1.1 732 - 2198 0.8 2198 - 2931 35.3 -2.7 2931 - 5861 33.5 0.2 5861 - 14654 41.2 -6.0 14654 - 29307 38.8 -1.2 29307 - 58614 51.0 -9.2 58614 - 293071 53.1 -7.5 293071 - 1465355 55.7 -3.7 Interruptible 25.8 27.2 20.3 15.8 25.5 26.7 26.1 21.6 31.8 10.2 6.1 43.7 45.8 -7.1 -9.9 52.9 54.2 -4.6 -6.1

Impact Analysis BS SOQs Scotland Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 38.13 0.8 3.0 Firm 73.2 – 146.5 37.70 2.4   146.5 – 293.1 293.1 – 439.6 39.84 -0.1 -0.2 439.6 – 586.0 40.65 -1.1 586.0 – 732.0 41.44 -2.0 -2.2 732 - 2198 41.47 -1.5 -1.7 2198 - 2931 40.82 0.2 0.1 2931 - 5861 43.30 -2.1 5861 - 14654 47.75 -5.9 -5.8 14654 - 29307 50.51 -7.2 29307 - 58614 64.06 -17.2 -17.3 58614 - 293071 79.60 -24.8 -25.0 293071 - 1465355 93.95 -30.9 Interruptible 0.00 24.2 55.38 6.9 -15.3 38.98 46.13 13.4 -3.6 38.84 58.1 10.1 -21.7 41.93 59.63 -30.8 -12.3

Impact Analysis BS SOQs Southern Load Factor Revised Load Factors Original Change SOQ Adj Change Domestic 0-73.2 31.45 1.0 Firm 73.2 – 146.5 31.82 0.5   146.5 – 293.1 31.72 0.7 293.1 – 439.6 31.62 0.9 439.6 – 586.0 32.13 0.1 586.0 – 732.0 32.72 -0.7 732 - 2198 33.35 -0.8 2198 - 2931 35.65 -2.0 -4.3 2931 - 5861 37.33 -4.7 -4.6 5861 - 14654 40.97 -9.2 14654 - 29307 42.02 -10.2 29307 - 58614 53.33 -29.1 58614 - 293071 47.84 -12.4 293071 - 1465355 60.65 -18.5 Interruptible 23.58 38.56 59.7 34.0 29.96 53.35 30.1 -42.6 49.25 50.91 -16.2 -12.5 34.00 46.19 21.5 -10.6 68.15 73.94 -32.0 -23.9