Customer Charge On behalf of all DNs 19 November 2010
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Customer ChargeOn behalf of all DNs19 November 2010
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Customer Charge Background______________________________________________________________________________________________________________________________
• Originally determined by Transco
• Designed to recover particular costs, mainly relating to provision of emergency services, and the repair, maintenance, replacement and depreciation of service pipes funded by transporter
• Generate ~30% of Collected Revenue
• Over 90% is collected from SSPs (c.£30/SSP annually)
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The current Customer Charge______________________________________________________________________________________________________________________________
• SPs with AQ > 732MWh operate on a capacity based power function
• SPs with AQ between 73.2MWh and 732MWh operate on a linear capacity based function and an additional per supply point function.
• SPs with an AQ of less than 73.2MWh operate on a linear capacity based function.
• All current DN charges are based on these original National basis charging structures
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Why change?______________________________________________________________________________________________________________________________
• The Customer Charge has not been fundamentally reviewed since the original charge was determined by Transco/Ofgas
• Ofgem report “Conclusions on the review of the structure of has distribution charges” – costs underlying the Customer Charge should be reviewed
• DNs required to ensure charges are cost reflective
• Need to rebase charges on a network rather than national specific basis
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Recent activity______________________________________________________________________________________________________________________________
• Final areas of methodology in the 2006 Ofgem report
• Relevant costs identified in PC05
• DNs seeking to consult on this area to enable potential change at April 2012 in line with other planned changes
• DNs wish to engage input and opinion from shippers at special DCMFs (19th November & 17th December)
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Potential timeline______________________________________________________________________________________________________________________________
Date Action Governance
November 2010 Consult and engage with shippers at special DCMFReceive feedback and further ideas, to enable development of UNC Modifications
Existing DCMF
December 2010 DNs develop Modifications and circulate in draft for comment/discussion at DCMF
Existing DCMF
2 January 2011 DNs and/or shippers issue Modifications to JO for inclusion at next Modification Panel, recommending issue for consultation
UNC
20 January 2011 Modification Panel decides pathway:WorkgroupConsultation (15 WD)
UNC
11 February 2011 Final date for representations UNC
17 February 2011 FMR not ready for 5 days in advance due to close out date UNC
17 March 2011 Modification Panel votes on recommendation UNC
After Ofgem decision JO update UNC with legal text if it includes transitional arrangements UNC
1 April 2012 Implementation Date UNC
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Costs underlying the Customer Charge______________________________________________________________________________________________________________________________
• Emergency costs• All costs associated with emergencies on service pipes and supply points
• Service pipe costs• Pipe replacement costs and depreciation
• Indirect costs• Allocation of support and employee overheads
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Potential Customer Charge methodology______________________________________________________________________________________________________________________________
• A single fixed daily charge per supply point for each network
• A two-rate fixed daily charge for SSPs and LSPs for each network
• A derived capacity charge
• No change
• Another method
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Potential Customer Charge methodology______________________________________________________________________________________________________________________________
A single fixed daily charge per supply point for each network
• Emergency costs show no strong correlation with supply point size
• No increased likelihood that a larger supply point will have a gas emergency
• No significant difference in cost to deal with an emergency at a large supply point than at a small one
• Simplest possible charging outcome
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Potential Customer Charge methodology______________________________________________________________________________________________________________________________
A two-rate fixed daily charge for SSPs and LSPs for each network
• Service pipes can be divided into domestic and non-domestic supply point related costs, broadly corresponding to <73.2MWh (SSP) and >73.2MWh (LSP)
• “10 metre allowance” element of service depreciation allocated across domestic supply points only or allocated across all supply points
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Next steps______________________________________________________________________________________________________________________________
• Views of Shippers and others sought on:• Likely shipper implementation impacts and timescales
for either of the two options• Other options for the structure of the customer charge
which should be considered• Pros & Cons of aligning a change to the customer
charge structure with other planned changes for April 2012
• Other implementation issues•Other Questions / Discussion Points / Feedback
• Next DCMF – 15th December 2010