1. Capacity Market – Introduction & Illustration
November 2016
PRESENTATION TITLE ( FOOTER CAN BE PERSONALIZED AS FOLLOW: INSERT / HEADER AND FOOTER")
00/00/2015

2. EMR & the Capacity Market
Security of Supply
Affordable Energy
De-Carbonisation
The Government’s Electricity Market Reform has three main objectives:
The Capacity Market, is ultimately designed to secure the supply of electricity
Competitive auctions are held four years (T-4) and one year (T-1) ahead of the year that capacity is expected to be in place
Bidders (generators and consumers) provide the price at which they’re willing to provide capacity to the network
The final tranche of capacity which is procured sets the clearing price for all bidders

3. Who Takes Part & When?
Costs started accruing in August 2014, when an office was created and administrative tasks began
Participants first started offering capacity in the form of demand reduction (DSR) for the Winter of /17; DSR can only take part in the T-1 auctions
Generators are due to first offer capacity in the Winter of 2017/18; Generators participate in both the T- 4 and T-1 auctions with the vast majority of capacity being secured in the T-4 auction

4. Illustrative Customer Cost
Cost Expectations
Capacity Market Costs will start in earnest in November 2017
Charging Year
Annual Industry Cost
Illustrative Customer Cost
p / kWh
November 2015
~ £4 m
0.0009
November 2017
> £1bn ?
> 0.3 ?
You can estimate Capacity Market Costs by dividing the Annual Industry Cost by the Industry Consumption in the Time of Use (ToU) period, and multiplying by the customer’s ToU consumption…
100 kW baseload customer consumes 25,000 kWh over the ToU schedule and 876,000 kWh over a year
Assume national demand is 50 GW, and so consumption over ToU schedule is 12,500,000,000 kWh
Industry Annual Cost X Customer ToU Consumption
Industry ToU Consumption
= £1,000,000, x ,000
12,500,000,000
= £2,000 per annum

5. How does ENGIE Quote / Invoice?
Year 1 Cost
Estimated Industry Yr 1 Cost X Customer Yr 1 ToU Quoted Consumption
Estimated Industry Yr 1 ToU Consumption
= £26,000, x 25,000
12,500,000,000
= £52
Year 2 Cost
Estimated Industry Yr 2 Cost X Customer Yr 2 ToU Quoted Consumption
Estimated Industry Yr 2 ToU Consumption
= £1,000,000,000 x 23,000
12,000,000,000
= £1,840
ESTIMATE FOR THE QUOTE = £1,892
Additional Calculation
Estimated Annual Capacity Market Volume (EACV) = Customer Yr 1 ToU Quoted Consumption
INVOICE
Monthly Invoice in Year 1
Actual Industry Yr 1 Cost X EACV
Estimated Industry Yr 1 ToU Consumption
= £26,054, x 25,000
12,500,000,000
= £52.11
= £ = £0.14 per Day
365 Days
MONTHLY INVOICE (30 Day month) = £4.28
Monthly Invoice in Year 2
Year 2 Industry Annual Costs and Industry ToU Consumption; EACV is updated with Customer Yr 1 ToU Actual Consumption

6. How does ENGIE Reconcile?
Year 1 Invoiced Cost
RECONCILIATION
Year 1 Actual Cost
= £43.27
Actual Industry Yr 1 Cost X EACV
Estimated Industry Yr 1 ToU Consumption
= £26,054, x 25,000
12,500,000,000
= £52.11
Actual Industry Yr 1 Cost X Customer Yr 1 ToU Actual Consumption
Actual Industry Yr 1 ToU Consumption
= £26,054, x 21,375
12,782,511,270
RECONCILIATION VALUE = - £8.54
Note an ad hoc adjustment will be included on the May 2017 reconciliation to account for amounts invoiced in the previous system