DN Interruption Reform

Distribution Workstream

23rd July 2009

2

Agenda

Background to DN Interruption Reform

Outcome of 2008 DN Interruption tender

DN Analysis

Proposed Approach

Next Steps

3

Background to DN Interruption Reform

Implemented 1 April 2008

DNs tender for interruption rights three years ahead of use

DNs incentivised to procure appropriate level of interruption

and investment in networks

Fewer interruptibles from 2011 onwards

4

Outcome of 2008 DN Interruption Tender

DN

Post 2011 Interruptible Load

% peak load No. of sites

SGN <1 7

NGN 1.05 5

NGG 0.2 7

WWU 0.4 4

5

All DNs Prelude

Total DN Current Percentage of Each Load Category- Prelude

74%

15%

3%

2% 6%

Firm 0 - 25,000 tpa

Firm 25,000 to 2,000,000 tpa

DM Firm Supply Points

Firm VLDMCs

Interruption

6

All DNs Post Mod 90

Total DN Percentage of Each Load Category - Post Interruption Reform

74%

15%

8%

3%

0%

Firm 0 - 25,000 tpa

Firm 25,000 to 2,000,000 tpa

DM Firm Supply Points

Firm VLDMCs

Interruption

7

Approach

Identify Firm Load Shedding Capability post Mod 90

Establish a target based on the performance achieved in Exercise Prelude

NEC wants speed and confidence on DN deliverability

Load shed in 4 hours

LDZ specific

Resources available for Site visits where required

Shipper obligations remain to maintain site contact details

8

Example – NGG Analysis Prelude

9

Example – NGG Analysis post Interruption Reform

10

Next Steps

DN Best Practice

Preparation Data Validation [NG top 200 per LDZ] Site Visits > 2 million therms [NG 212 across 5 LDZs] NEC involved Industry Engagement

GATG

Emergency Exercises (2009 and 2010) Highlight Target Customers Recycling Contact Information Escalating Contact Information Increased Number of Site Visits

Revised DN Safety Case submissions August 2009

11

Summary

Current approach aims to improve the quality of contact information at the larger FSPs.

Contact Information will be issued to Users

Users will be expected to update the Supply Point Register where necessary

Quality of information to be assessed via [NEC] exercise

12

Possible Future Changes

Concern that performance may remain low:

Option for consideration of incentives for the accuracy of User provided information

It is not our intention to propose such a regime at this time

Mod proposal 0728 – decision letter. Effectiveness of incentives on interruption contacts

“In contrast to firm load shedding, incentives exist in the UNC for shippers to ensure this data is correct, so that interruption occurs when required. UNC penalties apply for failure to interrupt and these are usually replicated in relevant supply contracts with customers. Such incentives appear to have worked successfully to date…for sites with firm supply contracts, statistics have shown widely varying levels of shipper/supplier performance. …collecting and maintaining ECI comes at a cost, and [Ofgem] takes the view that those shipper/suppliers with poor levels of performance should not obtain an advantage over others. Ofgem therefore considers that further thought should be given to introducing greater incentives in this area”

13

Potential Scope of User Provided Contacts Scheme

Scheme aimed at testing quality of contacts provided by Users

Top 200 sites (Bands A and B) per LDZ will be validated by Transporter and are hence an inaccurate measure of User performance

Next largest 50 sites (Band C) per LDZ (650 across 13 LDZs) could be measured for the purposes of an incentive scheme

LDZ 1 LDZ 2

732,000kWh

Band A - Mandatory DM – Transporter Site

Visits / Phone Call

Band B - Remainder of top 200 per LDZ –

Transporter phonecalls

Band C - 201- 250th largest per LDZ –

Subject to incentive scheme

Largest LFSPs

Smallest LFSPs

AA

BB

C C

14

Potential Financial Scheme Operation: Principles

Transporters would be revenue neutral within the scheme

However, they would recover costs associated with administration of the scheme

Value of incentive charges would be inversely proportional to performance

High overall performance would result in comparatively low incentive charges

Low overall performance would result in comparatively high incentive charges

Scheme would require

‘Income’ – notionally paid into scheme by Users (based on market share of Band C)

‘Expenditure’ – scheme notionally repays funds to Users (based on individual performance within Band C)

Only the net value is actually invoiced

Income and expenditure levels would be determined by registered SOQ valuesto reflect relative importance of larger loads in Firm Load SheddingProcess

Performance assessed via NEC Annual Exercise