1. Mod 0621 Amendments to Gas Transmission Charging Regime
0621 Workgroup GDN Action 0501

2. GDN Action 0501
New Action :
1. All GDNs asked to update the presentation material provided for the meeting to provide any additional information to illustrate the potential impacts on consumers or competition (by lunchtime on Friday 04 May 2018) for inclusion in the Workgroup Report or for publication prior to the Modification Panel decision to send 0621 to consultation.
2. In addition, to provide an estimate of how many embedded gas generators was requested.
3. DNs early views as to whether the charging methodology can be amended in any way to reduce the volatility or variances in charges to consumers.
4. Where possible to clarify within the analysis where commodity is included as well as capacity.

3. GDN supplementary analysis of Mod 0621 TO Exit Capacity and Commodity impact
GDN assumptions :-
The analysis reflects the impact on Transmission Services only - Transmission Services CWD Model V2.2 has been used to determine the firm exit capacity prices by offtake;
The forecasted impact of the change in GDN exit capacity (ECN) and NTS exit commodity charge levels,
GDN’s have used best endeavours to accurately reflect the exit commodity impact using the rates as published and advised by NTS in the 0621 analysis workbook (Exit Prices tab);
The current level of GDN bookings as at October 2017;
That there are no changes to the revenue mechanisms currently in place for GD1, cost v allowance variance reflected on a two year lagged basis;
That Ofgem will re-set allowances at the start of GD2 to reflect NTS forecasted costs;
The impacts shown reflect the charging period April to March;
Charges which comprise the current LRMC levied cost do not reflect any updated view published on 1 May 2018 by the NTS.
Note:. Note that DN’s have no control as to how the impacts of the ECN charge will be passed through to end consumers. Without changes to charging methodology or DNs absorbing some cash flow impact, then changes to ECN will flow through to customer in line with their use of DN capacity.

6. Mod621 – Impact on GDN Allowances and customer charges……..
Key Assumptions
Analysis assumes October 2017 capacity bookings throughout
Based on latest available prices from NTS to 20/21 and assumed to continue at same rates after
Inclusive of both change in exit methodology (from LMRC to CWD in Oct 2019) and also the movement from Commodity to Capacity NTS pricing structure from Oct 2021 onwards
Illustrative guide below for impact on customer bills for domestic and Industrial/Commercial premises. The customer bill analysis below represents NGN Exit charges only as is not the total cost to the customer as it excludes NTS Exit Commodity Charges. The total impact is shown on the next slide as per action 0501/1.
£ Nominal Prices throughout

7. Workgroup Action 0501/1 : Total Customer Impact inclusive of NTS Charges……
This analysis is illustrative only and includes our forecast of what NTS Exit Commodity charges will be. This is based on the following NTS prices :
17/ p/kwh
18/ p/kwh
19/ p/kwh
20/ p/kwh
21/22 - 0
22/23 - 0
23/24 – 0
NTS commodity charges are effectively being passed on to GDN’s instead, who will then charge this on to end customers. As such there should be no impact to customers because of this change.
The significant customer impact in the NGN region is caused by the change in methodology from LMRC to CWD.
The 2 year GDN lag mechanism is causing charges to be at their highest in 22/23 (as trueing up allowances from 20/21).
The analysis shown throughout has been calculated from Mod621 prices to 20/21 and then assumes prices continue at the same rates.

8. Workgroup Action 0501/1 : large customers
As requested following on from WWU slide – analysis on large loads and any differences arising from loads that are directly connected to the NTS vs. loads that are DN connected. Note this is illustrative only and we have modelled NTS charging principles based on our knowledge. A review and/or NTS customer charges should be provided by NTS if decisions are being made from this analysis.
There are pricing differentials between a site connected directly to NTS vs. a DN connected site and what they get charged for Exit Capacity. This is due to differences in charges for TO Exit Capacity within NTS Pricing vs. that from GDN’s for Exit zone averages. With the potential introduction of Mod621 this position would get worse as charges significantly increase.
The table below shows an example of the total customer charge with an SOQ of 16.6m :
Workgroup Action 0501/2 : Number of Embedded Gas Generators
Connected currently - 2
Accepted Site - 24
Live Quotes – 40

9. Action 0501/3-GDNs early views as to whether the charging methodology can be amended in any way to reduce the volatility or variances in charges to consumers.
The modification signposts that its implementation will result in charges that are less volatile. From the impact analysis produced GDN’s have concerns that there will be increased and for some significant short to medium term ECN charge volatility as a result of implementing this proposal. There is also concern particularly when moving from the transitional to the enduring period that DN’s will be able to maintain cost reflectivity of NTS’s charges.
Both NTS and GDN’s work to the same pricing timetable and the charging requirements as set out in Standard Special Condition A4. This clash of timetables if adhered is likely to result in GDN’s setting exit capacity (ECN) price levels with little certainty. DN’s currently have no visibility of the timing of when NTS proposes to give sight of the associated indicative, final prices and revenue forecasts. This makes it very difficult to assess where there are potential timing conflicts with our own price setting process and signpost where GDN’s have the potential to introduce further volatility and risk due to the lack of clarity. There is also apprehension regarding the timeline for agreeing the methodology used for FCC in the enduring period. If there is no certainty of the price generated by the FCC in the enduring period by the end of January there is a high risk that GDN’s will be unable to maintain cost reflectivity of NTS’s charges. Significantly, any future variance between the costs forecast for RIIO GD2 and what NTS ultimately charge may result in longer term price volatility for our customers.
GDN’s under business as usual conditions set charges that apply for 12 months April- March.
We also publish 60 days notice of the final charges effective 1st April by 1st February. In order to provide the required assurance and internal sign off DN’s require certainty around all the elements incorporated in the change by the end of January/early February to allow sufficient time for internal sign off and governance.
Key Points to address on implementation of the preferred modification:
NTS provision of a timetable detailing when accurate indicative/final prices, revenue forecasts and confirmation of the price impact of the FCC in the enduring period will be publicly available;
Explore options to mitigate any NTS April exit capacity price changes on DN’s 12 month price setting process;
Early engagement with NTS and Ofgem on allowance setting to mitigate/minimise volatility;
Consideration of whether GDN’s are still best placed to recover NTS charge’s and if license changes maybe required to remove/limit the price volatility passed through to GDN’s and their customers.