1. Pricing Consultation Paper DNPC 01 Customer Charge Structure for the 0-73MWh Load Band
Presentation on behalf of all DNs
Lorraine Goodall - SGN
Paper written in agreement with all DNs

2. The Proposal
Change customer charge for 0-73MWh load band to capacity based
Target Implementation date 1 April 07

3. Reasons for Proposal Improve cost reflectivity Facilitate competition
Improve consistency

4. Improve Cost Reflectivity
Costs reflected in the customer charges are:
- Service pipe costs
- Supply point emergency service costs
These costs do not vary with throughput

5. Facilitate Competition
Remove source of instability
- Revenue sensitivity to volume
- Change equalises sensitivity
- No longer k variations due to weather

6. Pricing The impact of volume variation on K
£ revenue
Collectable
65% gradient
35% gradient
K over-recovery
Allowed
Income gained
Income lost
K under-recovery
Warm/reduction
Cold/increase
(Budgeted demand)

7. Price Control Review
Core Allowed Revenue fixed
Greater k variability

8. Price Control Review The impact of volume variation on K
65% gradient
£ revenue
Collectable
0% gradient
K over-recovery
Proposed Collected
Allowed
K under-recovery
Warm/reduction
Cold/increase
(Budgeted demand)

9. Description of change Remove existing 0-73MWh customer charge
New charge based on supply point SOQ
Ensure forecast revenue recovery neutral

10. Implementation Target date 1 April 2007
- Stable revenue flow from capacity charges
- Seasonal revenue flow from commodity charges
- Change required for formula year

11. Summary - Reasons for Proposal
Improve cost reflectivity
Facilitate competition
Improve consistency

12. Responses
Responses required by 30 October 2006