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IDNO Tariff Proposal

IDNO Tariff Proposal. Andrew Neves. Background. IDNOs have issues with current DNO tariffs Alleging ‘margin squeeze’ Particular issues with capacity and reactive charges Want structural parity between their tariffs and upstream DNO charges (i.e. simple structures)

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IDNO Tariff Proposal

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  1. IDNO Tariff Proposal Andrew Neves

  2. Background • IDNOs have issues with current DNO tariffs • Alleging ‘margin squeeze’ • Particular issues with capacity and reactive charges • Want structural parity between their tariffs and upstream DNO charges (i.e. simple structures) • WPDand SP’s tariff modification proposals vetoed • Both were complex changes which raised various issues • WPD has subsequently made revised proposals • Pressure from Ofgem • “…we urge all of the other DNOs to review their approach to charging IDNOs without delay….” (Martin Crouch – WPD veto letter)

  3. Proposal • Simple change • Based on current tariff pricing principles • Can’t match ‘fixed plus unit charges’ domestic structure against similar IDNO tariff due to variable number of connections - therefore propose simple ‘unit rate only’ versions of base commercial tariffs • IDNOs chose between base and unit only tariff for each connection • ‘Use it or lose it’ rule for capacity (needs developing) • Variants on four base tariffs • LV Small Non Domestic (two rate), LV Medium Non Domestic, LV Large Non Domestic and HV Large Non Domestic • Calculate equivalent unit rate by forecasting total yield of each base tariff and finding unit rates that give the same yield

  4. IDNO margin scenarios – CNE current tariffs Assumes 4000 annual units per house(15% night), ADMD 1.4 kW per house, 0.95 power factor, losses 1% LV-LV, 3% LV-HV.

  5. IDNO margin scenarios – equivalent CNE unit only tariffs Assumes 4000 units per house(15% night), ADMD 1.4 kW per house, 0.95 power factor, losses 1% LV-LV, 3% LV-HV.

  6. IDNO margin scenarios – choice of tariffs Percentages in bold are the best IDNO options for each scenario Assumes 4000 units per house(15% night), ADMD 1.4 kW per house, 0.95 power factor, losses 1% LV-LV, 3% LV-HV.

  7. IDNO margin scenarios – CNE draft G3 tariffs Assumes 4000 annual units per house(15% night), ADMD 1.4 kW per house, 0.95 power factor, losses 1% LV-LV, 3% LV-HV.

  8. Plus-points and potential issues • Plus-points • Simple change • Gives IDNOs choice • Addresses issue with structures • Generally improves margins • No change to underlying methodology • Principles easily transferable to G3 methodology in future • Requires only a simple boundary meter (or ‘virtual’ meter) • Potential issues • Use it or lose it rule needed to protect against ‘capacity hoarding’ • Discrimination between IDNOs and ‘normal’ customers?

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