Transcript Parameter Update - Joint Office of Gas Transporters

LDZ System
Charges –
Structure
Methodology
26 July 2010
What we discussed in April
• 26th April 2010 we took you through the methodology currently in place
• The Methodology defines the relative difference in Unit Charge depending on
load size.
•PC68 defined that:
•Three Charge bands using EUC loads 0-73.2MWh/a, 73.2-732MWh/a and
>732MWh/a
• Standard Unit rates and Power Function
• Separate CSEPs Power Function
Why Change –
• PC68 used national costs and a national sample
• From DNPC05 it is clear that each network has different costs
Review Scope
• Primary aim to reflect costs of each DN within their charges
• Methodology considered fit for purpose
• Licence requires us to take account of developments in the business
• Charges are no longer set nationally – Licence requires that each DN
sets charges to be cost reflective
• supply point and iGT growth – Licence requires that DN charges reflect
business developments
• A review was necessary to check that the current charging structure, which is
based on a national sample and costs, appropriately reflects the costs on a DN
specific basis.
• The review also needs to consider whether the CSEP function remains fit for
purpose in each DN
Updated Methodology Application
STRUCTURE
•The LP System accounts for the majority of network costs and supply point connections.
LP System was sub-divided into 6 sub-tiers, based on pipe diameter bands in PC68. In
the new analysis the LP System is sub-divided into 8 sub-tiers.
SAMPLING
• Samples used in this review are specific to each network which removes any bias
towards a particular LDZ.
• Given the relatively low number of connections to the LTS, IP and MP Systems the
data includes 100% of connections for both directly connected and CSEPs to these
tiers.
• In the previous review the LP System sample was selected to achieve a 95%
confidence level, or greater, over the LP System connections in aggregate. Samples
were selected separately for directly connected and CSEP connections. In this review
samples have been selected to achieve a 95% confidence level, or greater, for each
Load Band within the LP System. This approach ensures that the new samples are
representative of both larger and smaller Load Bands.
Updated Methodology Application
GAS FLOW ANALYSIS
•Gas flow analysis was calculated from a
sample network in PC68. In this review we
have carried out the gas flow analysis for
each DN.
COST ALLOCATION
• In previous reviews the cost were split
using the ABC costs for the main tiers. The
LPS cost was then sub-divided across the
pipe diameter sub-tiers pro-rata to the
replacement asset value of each sub-tier.
Costs have been identified using the
Regulatory Reporting Pack framework
used in DNPC05 and so this methodology
is consistent with the current cost
allocation methodology.
• The replacement asset value
methodology, used in PC68, was used to
allocate the identified asset-based
costs. Operational costs have been
allocated on appropriate bases for each
item.
Costs Category
Emergency (excluding service pipe and
downstream of network)
LTS maintenance
Storage maintenance
Mains maintenance
Mains expensed replacement
Mains repair
Regulatory depreciation (excludes
service pipe)
Allowed Return
Business Rates
Work Management
Indirect
Shrinkage – leakage
Shrinkage – Own use
Shrinkage - Theft
Licence Fee
Allocation
Split by pipe length (excludes LTS)
Directly allocated to LTS
Split over LPS tiers by SOQ utilisation
Split in proportion to value of each tier by
pipe length multiplied by Replacement
Target Value – excludes LTS
Split in proportion to value of each tier by
pipe length multiplied by Replacement
Target Value
Split in proportion to operational costs
(emergency, maintenance, repair,
expensed replacement)
Allocated to tier directly (LTS, IP, MP,
LPS)
Split by AQ utilised
Split by AQ utilised – LTS only
Allocated by supply points on tier
Results
East of England - Direct & CSEP Loads
Capacity Charges
West Midlands - Direct & CSEP Loads
Capacity Charges
0.160
0.180
0.140
0.160
0.120
0.140
p/pdkWh/day
0.080
0.060
p/pdkWh/day
0.120
0.100
0.100
Existing Direct Loads
0.080
Data - All loads
Existing CSEPs
Existing Direct Loads
Data - All loads
0.060
Existing CSEPs
0.040
0.040
0.020
0.020
SOQ kWh
SOQ kWh
0.000
1
10
100
1,000
10,000
100,000
1,000,000
10,000,000
0.000
1
10
100
1,000
10,000
100,000
Example results showing cost data comparison to existing charges (equivalent
total revenue recovered)
1,000,000
10,000,000
Results
The key conclusions from consideration of the cost data are:
•The present LDZ System Charging Structure, with the current relative balance of charges, does
not accurately reflect the costs for each network.
•There are sufficient differences in the relative levels of unit costs across the load bands between
networks to justify, on the basis of improved cost reflectivity, LDZ System Charging functions with
different relative levels of charges across load sizes in each network.
•The unit cost data would seem to support retaining a three tier structure of Charge Bands.
However the optimum breakpoint between the middle and top tier of charges varies across
networks (currently this is 732 MWh/a).
• A separate charge rate for a Sub 73.2 MWh/a tier seems to be justified. It is proposed to
continue to have a flat unit rate charge for this charge tier.
Q.1 Is there any reason why the DNs should not adopt a network specific
form of function rather than a national form of function for LDZ System
charges?
CSEP/Directly Connected Function Alignment
Comparison between CSEP & Directly Connected Cost data points
East of England
0.3000
0.2500
p/pdkWh
0.2000
Directly Connected Loads
CSEPs
Combined Cost Data
0.1500
0.1000
0.0500
0.0000
1
10
100
1000
10000
SOQ (pdkWh)
100000
1000000
10000000
• Results show that CSEPs networks typically attract higher costs on average for smaller
loads and similar costs, or slightly lower costs, for large loads.
CSEP/Directly Connected Function
Alignment
• Connection probability data shows that on lower load band CSEPs typically make more
use of the network than the average directly connected equivalent sized load.
70.000%
>293071MWh/a
CSEP Conneted Loads
Average point of connection
2.4-5" (median)
58614-293071MWh/a
60.000%
Direct Conneted Loads
Average point of connection
3.6-7" (median)
CSEPs (732-2931)
14654-58614MWh/a
2931-14654MWh/a
50.000%
Direct Connect (732-2931)
732-2931MWh/a
Median Connection Point
between CSEP and Directly
Connected converges for large
loads. This represents less than
1% of CSEPs in any DN.
586-732MWh/a
40.000%
440-586MWh/a
293-440MWh/a
30.000%
146-293MWh/a
73.2-146MWh/a
20.000%
Directly Connected
CSEPs
0-73.2MWh/a
10.000%
LTS
Charge band <73.2MWh/a
EoE ~5% of all CSEPs
0.000%
LTS
IP
MP
8. >630mm
7. 500-630mm 6. 355-500mm 5. 250-355mm 4. 180-250mm 3. 125-180mm
2. 90-125mm
1. <=90mm
IP
MP
8.>630mm
Charge band 73.2-732MWh/a
EoE ~60% of all CSEPs
7.500-630mm
6.355-500mm 5. 250-355mm 4. 180-250mm 3. 125-180mm2. 90-125mm
Charge band >732MWh/a (less than
58,614Mwh/a) EoE ~34.5% of all CSEPs
1. <=90mm
Charge band >732MWh/a (greater than
58,614Mwh/a) EoE ~0.5% of all CSEPs
CSEP/Directly Connected Function
Alignment
• Connection probability data shows that in some networks the very large loads make less
use of the network
• However, this represents less than 1% (by number) of CSEPs
• We propose to retain the current methodology
• DNs would not charge CSEPs in lower load bands at increased levels compared with
equivalent directly connected loads
• with three charge bands CSEP function is consistent with the directly connected
level
Q.2 Do you agree that, based on the analysis shown, transportation to
CSEPs and to directly-connected loads should use the same charging
functions?
Structure & Forms of Function
• We have based our evaluation of the results on analysis that incorporates CSEP and
Directly connected load data into a single set of charge functions
• Uses Complete EUC bands
•Three options identified:
a) Parameter Update - a simply update to the current form of function and
structure of charges;
b) Best Fit - optimized functions and structures to achieve the best fit of
functions to the cost data;
c) Common Function Form - revised functions and structure to achieve
the best fit of cost data constrained by common functions and charge bands.
Parameter Update
• Under this option the current form of charging functions would be retained i.e. a
standard unit rate will apply for 0-73MWh/a, a separate standard unit rate applies to
73-732MWh/a loads and a power function will be applied for loads in excess of
732MWh/a.
Network
East of England
North West
London
West Midlands
Scotland
Southern
Northern
Wales & West
Breakpoint
(MWh/a)
MiddleHigher
732
732
732
732
732
732
732
732
Function Type
Middle / Higher
Fixed/ Power
Fixed/ Power
Fixed/ Power
Fixed/ Power
Fixed/ Power
Fixed/ Power
Fixed/ Power
Fixed/ Power
R
2
0.993
0.996
0.995
0.999
0.985
0.993
0.930
0.972
Maximum Error
Deviation
8.5%
8.1%
44.0%
24.9%
21.1%
33.3%
59.0%
31.7%
Parameter Update – Comparison to Existing
charges
• From a visual inspection the Update in Parameters on a combined CSEP & Directly
connected basis results in 0-73.2MWh/a charges slightly increasing with higher load band
charges reducing.
Parameter Update – Impacts
Directly connected loads
Network / Load
band (MWh/a)
0-73
73-147
147-293
293-440
440-586
586-732
732-2931
2931-14654
14654-58614
58615-293071
>293071
Interruptible
Users
Total
East of
England
London
North
West
West
Midlands
Scotland
Southern
England
Wales &
West
Northern
England
3.2%
-7.9%
-8.7%
-9.0%
-9.2%
-9.3%
-12.8%
-16.1%
-19.6%
-22.9%
-28.0%
0.8%
-1.6%
-1.8%
-1.9%
-1.9%
-2.0%
-2.2%
-5.8%
-9.0%
-13.0%
-16.2%
3.6%
-4.4%
-4.7%
-4.9%
-5.0%
-5.0%
-14.3%
-20.4%
-28.4%
-33.2%
-36.1%
1.6%
-0.4%
-0.5%
-0.5%
-0.5%
-0.5%
-0.3%
-11.0%
-21.9%
-30.1%
n/a
2.8%
1.7%
2.2%
2.6%
2.7%
2.8%
-12.6%
-18.0%
-24.0%
-30.8%
n/a
3.8%
-7.2%
-7.7%
-7.9%
-8.1%
-8.2%
-12.3%
-25.1%
-36.7%
-48.7%
-56.6%
2.8%
-2.0%
-2.1%
-2.2%
-2.3%
-2.3%
-4.3%
-11.8%
-20.2%
-26.1%
-31.1%
3.5%
-5.1%
-5.1%
-5.1%
-5.7%
-5.1%
-9.0%
-15.0%
-17.7%
-22.4%
-33.1%
-21.5%
0.3%
-15.0%
0.0%
-34.4%
0.2%
-28.9%
0.0%
-29.2%
0.1%
-48.4%
0.1%
-24.8%
0.7%
-31.2%
0.3%
Impacts based on comparison between current charges (100% Capacity basis –
DNPC07) and updated DN specific LDZ System charges “Parameter Update”
Parameter Update – Impacts
CSEPs
Network / Load
band (MWh/a)
0-73
73-147
147-293
293-440
440-586
586-732
732-2931
2931-14654
14654-58614
58615-293071
>293071
Interruptible
Users
Total
East of
England
London
North
West
West
Midlands
Scotland
Southern
England
Wales &
West
Northern
England
5.0%
-9.8%
-9.8%
-9.8%
-9.8%
-9.8%
-7.9%
-10.2%
-13.5%
n/a
n/a
1.4%
-2.1%
-2.1%
-2.1%
-2.1%
-2.1%
4.0%
1.7%
-1.2%
n/a
n/a
5.4%
-5.3%
-5.3%
-5.3%
-5.3%
-5.3%
-9.6%
-15.4%
-25.4%
n/a
n/a
2.3%
-0.5%
-0.5%
-0.5%
-0.5%
-0.5%
6.5%
-4.9%
-17.5%
n/a
n/a
4.7%
1.9%
1.9%
1.9%
1.9%
1.9%
-1.2%
-6.3%
-11.6%
-15.4%
-22.2%
5.8%
-9.5%
-9.6%
-9.6%
-9.6%
-9.6%
-1.1%
-14.5%
-26.6%
-35.1%
n/a
4.2%
-2.4%
-2.4%
-2.4%
-2.4%
-2.4%
-5.1%
-12.5%
-20.2%
-26.6%
-33.2%
5.3%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-3.0%
-8.8%
-12.4%
-18.3%
-38.1%
n/a
-9.7%
n/a
1.0%
n/a
-10.7%
n/a
-0.5%
n/a
-2.7%
n/a
-9.7%
-38.5%
-10.4%
-49.2%
-13.9%
Impacts based on comparison between current charges (100% Capacity basis –
DNPC07) and updated DN specific LDZ System charges “Parameter Update”
Best Fit
Network
East of England
North West
London
West Midlands
Scotland
Southern
Northern
Wales & West
Breakpoint
(MWh/a)
MiddleHigher
732
732
2931
2931
732
2931
2931
2931
Function Type
Middle / Higher
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
Log / Log
Log / Log
R
2
0.990
0.995
1.000
0.996
0.985
0.997
0.965
0.995
•Improved cost reflectivity - significantly lower Maximum Error Deviations
•Comparable impacts in general with smaller 73-293MWh/a most affected
• Breakpoints and functions differ between DNs
Maximum Error
Deviation
6.2%
6.4%
2.5%
8.4%
19.3%
12.8%
16.5%
5.9%
Best Fit – Comparison between Options
Best Fit
Network / Load
band (MWh/a)
0-73
73-147
147-293
293-440
440-586
586-732
732-2931
2931-14654
14654-58614
58615-293071
>293071
Interruptible
Users
Total
East of
England
London
North
West
West
Midlands
Scotland
Southern
England
Wales &
West
Northern
England
-0.2%
7.8%
3.5%
-0.1%
-2.2%
-3.8%
-2.1%
-1.0%
0.2%
1.5%
3.0%
0.1%
2.1%
-0.4%
-2.7%
-4.1%
-5.0%
2.6%
3.8%
-6.9%
-19.0%
-27.4%
0.0%
0.0%
4.2%
2.3%
0.4%
-0.5%
-1.9%
-1.7%
-1.2%
-0.7%
-0.2%
0.0%
4.2%
-0.1%
-4.3%
-6.4%
-8.1%
0.6%
5.5%
-0.5%
-5.3%
n/a
0.0%
7.5%
4.7%
1.9%
0.4%
-0.8%
-4.1%
-2.7%
-1.3%
0.5%
n/a
0.0%
3.3%
-1.5%
-5.9%
-8.3%
-10.2%
1.7%
9.4%
4.9%
0.7%
-22.1%
0.0%
5.6%
0.8%
-3.3%
-5.8%
-7.7%
-0.4%
-1.1%
8.3%
9.1%
0.6%
0.7%
8.1%
-0.0%
-5.5%
-8.6%
-11.9%
-15.0%
-7.5%
-3.5%
3.1%
8.0%
1.3%
0.0%
-22.8%
-0.1%
0.1%
-0.1%
-4.5%
0.0%
0.3%
0.0%
-0.1%
0.0%
-38.8%
-0.4%
2.9%
0.1%
Impacts based on comparison between Parameter Update and Best Fit functions
•Parameter update most significant impact
•Form of Function update in addition
•0-73.2MWh/a load bands largely unchanged
•Variable impact for larger load bands
Common Function Form
•Breakpoints and functions aligned at 2931MWh/a and power functions for middle and higher
Charge band
Network
East of England
North West
London
West Midlands
Scotland
Southern
Northern
Wales & West
Breakpoint
(MWh/a)
MiddleHigher
2931
2931
2931
2931
2931
2931
2931
2931
Function Type
Middle / Higher
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
Power / Power
R
2
0.994
0.995
1.000
0.996
0.989
0.997
0.931
0.979
Maximum Error
Deviation
7.5%
7.3%
2.5%
8.4%
20.3%
12.8%
23.4%
11.8%
•Improved cost reflectivity - Not as good as the Best Fit but overall R2 comparable and deviations
remain significantly better than Updated Parameter option
•Comparable impacts in general with smaller 73-293MWh/a most affected
Best Fit – Comparison between Options
•Parameter update most significant impact
•Form of Function update in addition
•0-73.2MWh/a load bands largely unchanged from Parameter Update
•Variable impact for larger load bands
Common Function Form - Impacts
Network / Load
band (MWh/a)
0-73
73-147
147-293
293-440
440-586
586-732
732-2931
2931-14654
14654-58614
58615-293071
>293071
Interruptible
Users
Total
East of
England
London
North
West
West
Midlands
Scotland
Southern
England
-0.2%
8.9%
3.1%
-1.6%
-4.3%
-6.4%
2.4%
-3.5%
-1.9%
-0.3%
-16.9%
0.1%
2.1%
-0.4%
-2.7%
-4.1%
-5.0%
2.6%
3.8%
-6.9%
-19.0%
-27.4%
3.3%
0.0%
-22.8%
-0.1%
Wales &
West
Northern
England
0.0%
9.0%
1.7%
-4.6%
-7.9%
-10.4%
2.2%
-2.4%
-1.7%
-1.1%
-0.7%
0.0%
4.2%
-0.1%
-4.3%
-6.4%
-8.1%
0.6%
5.5%
-0.5%
-5.3%
n/a
-0.1%
6.4%
-0.2%
-5.9%
-8.9%
-11.2%
5.0%
-1.2%
-0.6%
0.1%
n/a
0.0%
3.3%
-1.5%
-5.9%
-8.3%
-10.2%
1.7%
9.4%
4.9%
0.7%
-22.1%
0.0%
-2.6%
-4.5%
-5.9%
-6.8%
-7.4%
4.4%
10.4%
4.2%
-0.7%
-4.1%
-0.4%
5.8%
0.1%
-3.5%
-5.7%
-7.5%
10.8%
7.3%
5.6%
2.4%
-5.5%
-1.3%
0.1%
-4.5%
0.0%
0.1%
0.0%
-0.1%
0.0%
0.0%
0.0%
-5.6%
-0.0%
Impacts based on comparison between Parameter Update and Best Fit functions
Q3 Of the three options discussed the Best Fit (b) functions would be the
most cost reflective but may be the most expensive to implement. Which
option of the three discussed (Parameter Update, Best Fit, or Common
Option) would you prefer to be implemented and why.
Questions
Q.1 Is there any reason why the DNs should not adopt a network specific form of function rather than a national form of
function for LDZ System charges?
Q.2 Do you agree that, based on the analysis shown, transportation to CSEPs and to directly-connected loads should
use the same charging functions?
Q3 Of the three options discussed the Best Fit (b) functions would be the most cost reflective but may be the most
expensive to implement. Which option of the three discussed (Parameter Update, Best Fit, or Common Option) would
you prefer to be implemented and why.
• Technically there is no DN system changes that would prevent or delay implementation.
•This review has been ongoing for some time and discussed informally and formally on a
number of occasions - no major changes to what has been discussed previously
• DNs aim to make changes in April each year (October has been used as a fall back date
if there is a sound rationale for delaying more cost reflective charging)
Q4 is there any reason why the proposals should not be implemented
from 1st April 2011?