© Energy UK April 2012

Transmission Workgroup – 4th April Financial Commitment for Incremental Capacity Presentation by Energy UK

www.energy-uk.org.ukt @energyukcomms

© Energy UK April 2012

Financial Commitment for Incremental capacity Financial Commitment for Incremental capacity 2

Where investment is required: Commitment will be demonstrated by providing security to cover an amount derived from the revenue driver.

Where no investment is required: How will commitment be demonstrated? There is no revenue driver Agree it should not be a free optionSome kind of financial commitment seems appropriate

© Energy UK April 2012

Options to demonstrate commitment where no investment is required

Financial Commitment for Incremental capacity 3

Reservation FeeSecurity placed at start of phase 2 to cover the Reservation fee Security called up on and fee paid if capacity not allocated (developer pulls out)

Just book it At start of phase 2 book capacity for desired delivery date Creates a 4 year user commitment form the delivery date To fine tune booking upwards – additional booking is necessaryTo fine tune booking downwards – would have to wait until user commitment is met User commitment applies whether or not project goes ahead

Just book it with additional rulesAs above but with additional rules to allow for changes to delivery date and fine tuning of quantity

© Energy UK April 2012

Issues for each option Financial Commitment for Incremental capacity 4

The relative level of cost for each option is the main driver for determining a favoured option

The start of Phase 2 is very early in a project lifecycleThe final investment decision is many years awayDevelopers will have limited funds available at this time

Reservation Fee

Provides certainty over capacity booking Provides a mechanism for fine tuning and amending delivery dates Consistent with PARCA principles where investment is required

Just book it Provides certainty over capacity booking Opportunities for fine tuning and amending delivery date limited Risky if planning not successful

Just book it with additional rulesAdditional rules to allow for changes to delivery date and fine tuning of quantity add complexity

© Energy UK April 2012

Summary Financial Commitment for Incremental capacity 5

Cost to the project is a key issue

If the Reservations Fees option is less than the Just book it options this is favoured Developers will have limited funds available at this timeProvides certainty over capacity booking Provides a mechanism for fine tuning and amending delivery dates Consistent with PARCA principles where investment is requiredAvoids the need to create new rules for flexibility