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Transparency & Predictability

This document outlines critical updates to the CDCM (Cost of Distribution Connection Methodology) aimed at improving transparency and predictability in the pricing process. Key elements include clearly defined inputs, a comprehensive process for updating these inputs, and the implications of customer behavior assessments. Additionally, it discusses the proposed SSE framework to ensure that the methodology adheres to all relevant data sources, assumptions, and periods. The intention is to strike a balance between cost-reflectivity and stability while enhancing user understanding and predictability of costs over time.

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Transparency & Predictability

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  1. Transparency & Predictability DCMF Andy Manning 1st April 2010 1 1

  2. CDCM Transparency and Predictability • All inputs to be fully defined within Methodology • Process for updating inputs to be reviewed: • Inputs related to assets potentially fixed for length of price control • Inputs related to customer behaviour converted to a 3-year rolling average • Interaction with other initiatives • Enhancements to DCP30/50 cost information provision • Longer term products • SSE proposal

  3. CDCM Transparency • All inputs to be fully defined with Methodology- to include where relevant: • Data sources • Any preliminary calculations undertaken • Reference periods • Any assumptions made • Settlement Run etc

  4. Load Profile Data- Domestic UR

  5. Load Profile Data- HH LV Network

  6. DRM Data

  7. CDCM Updating process • Some inputs to be fixed for Price Control • Clarity, certainty and simplicity • Elements users least likely to be able to replicate/forecast • ‘Slow-moving’ in nature • Full review around Price Control • Some inputs to be updated on rolling average basis • Need to capture underlying trends but avoid one-offs • Compromise between cost-reflectivity and stability • Remainder updated as currently • E.g. Allowed Revenue • Time bands?

  8. Potential Issues • Fixing asset-based inputs will increase scaling year-on-year • Does the impact of scaling remain appropriate with increasing revenues? • Asset values could be indexed • Inter-related inputs • If inputs are related, can they be updated through differing processes? • Interactive proposals • Will clearly interact with other work

  9. Potential Next Steps • Use Work-stream C to coordinate ‘volatility’ work • Possibly further analysis: • Volatility of inputs • Sensitivity of models • Commonality of inputs • Potential DCUSA changes • Wider solution: • DCP30 development

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