Use of System Charges — workshop Holiday Inn

Use of System Charges - workshop Holiday Inn Express – 25 th May 2016

Safety Moment and Housekeeping

Agenda 09: 30 – 10: 00 – Registration 10: 00 – 10: 10 – Introduction and Updates Gary Bartlett 10: 10 – 10: 20 – Connections Charges Audrey Robertson 10: 20 – 11: 20 – Use of System (DUo. S) Charges Emma Clark • What are DUo. S Charges? • An overview of charging methodologies applied to EHV, HV and LV customers • Charge Calculator & Worked Example Demonstrations 11: 20 – 12: 00 – Question & Answer Session 12: 00 – Summary and close

Purpose of the event today To give an update on what we’re doing Get your feedback Opportunities for questions

Our approach to stakeholder engagement …is all about our customers Putting you at the heart of everything we do Listening to what you tell us Acting on your feedback Continuously improving our services

Delivering a better service for our customers: Our connections strategy Ease of initial contact Knowing who is dealing with your request Clear and easy to understand processes Increased awareness of choice

Here a couple of things we are now doing in response to customer feedback ……. MPAN guide Witness testing guide

At the end of May we will publish our Looking Back Report for 2015/16 and the Looking Forward Report for 2016/17 It shows: • Our Engagement strategy and approach • Detailed evidence of how commitments where identified and delivered • Clear measurable key performance indicators and endorsements • Completion dates • Commitments listed for 2016/17 deliverable

This coming year will see us focus on six key areas which customers have asked for. Innovation Customer Service Information Provision The Application Process Getting Connected Choice in Connections

40+ COMMITMENTS Proactively engage with generation customers to release unused capacity Make GIS shape files available Guidance on flexible connection process Improve our online tracking system Contact generation customers regarding planned outages Provide visibility of quoted jobs on heatmap Provide reinforcement details on offers Enable intermediate payment for wayleaves Highlight community case studies State available options for transmission constrained projects

We have a full calendar of events lined up to engage with our customers in 2016………. . National Events Engagement days Connections Surgeries Online View our events calendar on the SSEPD website to find out where we will be next……. www. ssepd. co. uk/stakeholderevent/basicsearch

Questions?

Connections Charges and our Obligations Audrey Robertson Commercial Manager (Training and System Support)

Connections Charges and our obligations • Obliged to offer the “Minimum Scheme” – Lowest overall capital cost. – Subject to our statutory obligations to “develop, maintain and operate an efficient, co-ordinated and economical electricity Distribution System” • The capital cost may be apportioned between yourselves and ourselves • We may include costs for works previously carried out where appropriate (under ECCR legislation) • Occasionally we may decide to design an Enhanced Scheme – in which case you will only pay the lower costs • Occasionally you may ask us for a scheme beyond the minimum – in which case you will pay all additional costs, (including on occasion the additional Operation and Maintenance costs. )

Connections Charges. . (contd. ) • What does this mean for you? – We will provide an offer that fulfils your capacity requirements – We will discuss and, wherever possible, accommodate your additional requests – But may not be the lowest cost to you… – This is not influenced by any subsequent Uo. S charges. • Our Charging Methodology is on our web site here: https: //www. ssepd. co. uk/Library/Charging. Statements/SHEPD/

Questions?

DUo. S Charges Emma Clark Pricing Analyst

DUo. S Charging - Topics Ø What are DUo. S Charges? Scottish Hydro Electric Power Distribution plc Ø Charging Framework Ø Charging Methodologies - CDCM - EDCM Ø Publication of Charges Ø Charge Calculator & Worked Example Demonstrations Southern Electric Power Distribution plc

Contractual Framework s ge ar Distributor h C n tio Connection c ne Agreement on DU o S DCUSA Ch ar C Customer Supply Agreement ge s Supplier § Upfront connection charges recover the cost of providing a connection § DUo. S charges recover the costs of maintaining the distribution network used for the transportation of electricity between: § Exit (Import) / Entry (Export); and § Grid Supply Points (GSP)

What are DUo. S Charges? Ø DUo. S charges apply to every connection and collect the revenue the Distributor needs to operate, maintain, repair and invest in the network Ø DUo. S charges are one component of a customer’s electricity bill and typically represent around 23%* for domestic Ø Distribution Network Operators (DNOs) invoice Suppliers for use of their distribution network. *https: //www. ofgem. gov. uk/information-consumers/domestic-consumers/understanding-energy-bills

Distribution Licence & DCUSA Obligations Ø SEPD / SHEPD is obliged under the Standard Conditions of the Distribution Licence to provide certain documents to allow the use of its electricity distribution system* Ø Licence Condition documents include: § LC 13: Distribution Use of System Charging Methodology § LC 14: Distribution Use of System Charging Statement Ø The Distribution Connection and Use of System Agreement (DCUSA) is the Industry code and governance which facilitates the contractual obligations of the key market trading participants**: § DNOs, Suppliers and IDNOs (Independent DNOs) *https: //www. ofgem. gov. uk/licences-codes-and-standards/licence-conditions ** https: //www. dcusa. co. uk/Site. Pages/Documents/DCUSA-Document. aspx

Allowed Revenue Ø Regulated Revenue that is allowed to be recovered from suppliers on an annual basis through DUo. S charges Ø It allows DNOs to maintain, repair and reinforce their networks Ø Ofgem closely examine and control the revenue of DNOs Ø RIIO-ED 1 Price Control: Revenue Incentives Innovation Outputs Ø DNOs recover Allowed Revenue through the application of common charging methodologies *https: //www. ofgem. gov. uk/network-regulation-riio-model/riio-ed 1 -price-control

CDCM / EDCM Overview Ø All DNOs adopt two common charging methodologies that are subject to DCUSA Open Governance: CDCM EDCM (Common Distribution Charging Methodology) (Extra-High Voltage Distribution Charging Methodology) Applicable from 1 st April 2010 Demand applicable from 1 st April 2012, Generation applicable from 1 st April 2013 LV and HV designated properties Designated EHV properties (EHV and HV Substation) Methodology calculates standard charges by customer type Methodology calculates site specific charges Export credit for intermittent and nonintermittent generation Export credit for generation supporting the network in demand dominated areas Subject to DCUSA Schedule 16 Subject to DCUSA Schedules 17, 18

SO - National Grid TO - SHET 132 k. V Network CDCM / EDCM Overview Diagram EHV Factory Site-specific charge or credit CDCM HV Superstore HV Generator credit 11 k. V Network Primary Substation Distribution Substation LV House LV Generator credit LV Network EDCM DNO - SHEPD 33 k. V Network Grid Supply Point EDCM – Extra High Voltage Distribution Charging Methodology (EHV & HVS customers) CDCM – Common Distribution Charging Methodology (HV & LV customers)

LDNO Tariffs • Licensed Distribution Network Operator (LDNO) includes: – IDNO (Licensed Independent Distribution Network Operator) – DNO Party operating an electricity distribution system outside of its Distribution Services Area Boundary LDNO e. g. IDNO LDNO’s charge* 33 k. V Network Host DNO - SHEPD 11 k. V Network DNO’s ‘all the way’ charge SO - National Grid TO - SHET Discounted LDNO Tariff 132 k. V Network • The LDNO Tariffs have standard discount percentages applied to the Host DNO’s ‘all-the-way’ charge *LDNO’s charge (including the Discounted LDNO Tariff from the Host DNO) tends to mirror the Host DNO’s ‘all the way charge’

CDCM / EDCM Allowed Revenue Area SEPD SHEPD Total Allowed Revenue (£) 2016/17 £ 571 m £ 301 m* £ 872 m * Including Hydro Benefit Scheme Allowed Revenue (£) Ratio CDCM EDCM £ 549 m £ 22 m £ 237 m £ 6 m £ 786 m** £ 28 m ** Not Including Hydro Benefit Scheme 4%

Common Distribution Charging Methodology (CDCM): HV and LV Designated Properties

What is CDCM? Ø CDCM is applicable to HV and LV designated properties (typically domestic and small/medium businesses) which covers: – HV: metered at nominal voltages of at least 1 k. V and less than 22 k. V – LV: metered at nominal voltages below 1 k. V Ø The CDCM sets standard HV & LV charges for demand (import) customers and credits for generation (export) customers Ø CDCM also produces ‘boundary’ charges for LDNOs whose network is connected to the SSEPD distribution system Ø The methodology is prescribed within Schedule 16 of the DCUSA Ø The current CDCM models can be found on the SSEPD website* *https: //www. ssepd. co. uk/Library/Charging. Statements/

CDCM Tariff Calculation Process – Overview Cost Inputs Cost Allocation Network Model Costs Annuity Period & Rate of Return Service Model Costs Diversity Allowance Transmission Exit Charge Volumes Business Costs Loss Adjustment Factors Allowed Revenue Load Characteristics Customer Contributions Scaling Tariffs LDNO Discount Calculation % Demand, Generation & LDNO Unit Rates Fixed Charge Capacity & Exceeded Capacity Charges Reactive Power Charge

Demand Tariff Structure Tariff name Domestic Unrestricted Domestic Two Rate Open LLFCs 100, 105, 106, 110, 125, 126, 300, 305, 320, 325 101, 111, 121, 127, 128, 301, 321 PCs Unit charge 1 Unit charge 2 (NHH) Green or red/black or amber/yellow charge(HH) charge (HH) p/k. Wh Fixed charge p/MPAN/day Capacity charge p/k. VA/day Reactive Exceeded power capacity charge p/k. VArh p/k. VA/day Closed LLFCs 1 3. 592 7. 05 2 3. 871 1. 264 7. 05 LV Network Domestic 506 0 7. 912 3. 147 0. 901 7. 05 LV HH Metered 500 0 5. 535 2. 197 0. 641 23. 90 4. 53 0. 464 4. 53 LV Sub HH Metered 505 0 3. 956 1. 560 0. 481 9. 41 8. 42 0. 316 8. 42 HV HH Metered 600 0 2. 998 1. 176 0. 379 229. 29 10. 98 0. 246 10. 98 803, 805 8 2. 990 804 0 13. 756 3. 110 1. 539 NHH UMS category A LV UMS (Pseudo HH Metered) Restructured extract from SHEPD 2016/17 Schedule of Charges and Other Tables spreadsheet Tariff Component Key Driver Unit rate(s) Volume & Allowed Revenue Fixed charge Reflects network operating costs Capacity charge MIC specified in Connection Agreement Reactive power charge Accounts for the increased inefficiency of operating a power factor less than 0. 95 Exceeded capacity charge Applies to any unauthorised exceeded portion of capacity taken over and above the agreed MIC

Generation Tariff Structure Tariff name Unit charge 2 Unit charge 1 Reactive Exceeded (NHH) Green Capacity (NHH) Fixed charge power capacity Closed or charge(HH) charge Open LLFCs PCs or red/black amber/yellow p/MPAN/day charge LLFCs charge (HH) p/k. Wh p/k. VA/day charge (HH) p/k. VArh p/k. VA/day p/k. Wh LV Generation NHH or Aggregate HH 951 8&0 -1. 081 0. 00 LV Sub Generation NHH 952 8 -0. 949 0. 00 1, 909 0 -1. 081 0. 00 0. 239 LV Generation Non-Intermittent 2 0 -3. 007 -1. 212 -0. 307 0. 00 0. 239 LV Sub Generation Intermittent 3 0 -0. 949 0. 00 0. 209 LV Sub Generation Non-Intermittent 4 0 -2. 639 -1. 063 -0. 271 0. 00 0. 209 5, 910 0 -0. 462 283. 97 0. 188 6 0 -1. 278 -0. 512 -0. 137 283. 97 0. 188 LV Generation Intermittent HV Generation Non-Intermittent Extract from SHEPD 2016/17 Schedule of Charges and Other Tables spreadsheet Classification (in accordance to the definitions in Engineering Recommendation P 2/6) Intermittent Generation Non-Intermittent Generation A generation plant where the energy source of the prime mover cannot be made available on demand A generation plant where the energy source of the prime mover can be made available on demand These include wind, tidal, wave, photovoltaic and small hydro. These include combined cycle gas turbine (CCGT), gas generators, landfill, sewage, biomass, biogas, energy crop, waste Incineration, combined heat and power (CHP) and Battery Storage* *Battery Storage classification subject to industry confirmation

Price Signals Ø CDCM standard charges are non-locational Ø Customers consumption pattern will impact their annual DUo. S charge Ø Time Bands apply to unit rates for HH tariffs – discourage/encourage use of the network at particular times Ø 2016/17 Time bands for SHEPD: Time Bands for Half Hourly Metered Properties Time periods Monday to Friday (Including Bank Holidays) All Year Saturday and Sunday All Year Notes Red Time Bands for Half Hourly Unmetered Properties 12: 30 - 14: 30 16: 30 - 21: 00 07: 00 - 12: 30 14: 30 - 16: 30 Yellow Time Band Green Time Band 07: 00 - 21: 00 00: 00 - 07: 00 21: 00 - 24: 00 Monday to Friday (Including Bank Holidays) October to March Green Time Band Black Time Band Monday to Friday (Including Bank Holidays) April to September Amber Time Band 16: 30 - 21: 00 07: 00 - 16: 30 00: 00 - 07: 00 21: 00 - 24: 00 Time Periods 00: 00 - 07: 00 21: 00 - 24: 00 Saturday and Sunday April to September 00: 00 - 12: 30 14: 00 - 17: 30 20: 30 - 24: 00 All the above times are in UK Clock time Saturday and Sunday October to March 12: 30 - 14: 00 17: 30 - 20: 30 Notes Ø Time Bands reviewed and updated for 2017/18 00: 00 - 12: 30 14: 00 - 17: 30 20: 30 - 24: 00 00: 00 - 12: 30 - 14: 00 - 17: 30 - 20: 30 - 24: 00 All the above times are in UK Clock time 12: 30 - 14: 00 17: 30 - 20: 30

Extra-High Voltage Distribution Charging Methodology (EDCM): Designated EHV Properties

What is the EDCM? Ø Extra-High Voltage Charging Methodology (EDCM) is applicable to designated EHV properties (typically large businesses and large generators) which covers: – EHV: metered at nominal voltages of 22 k. V or above – HV Substation: metered at nominal voltage of 11 k. V if the metering is within the boundary of the primary substation e. g. 33/11 k. V Ø The EDCM sets locational site specific charges for import and export customers, charges for EDCM-like customers within an IDNO network and boundary charges IDNO networks connected at EHV Ø SEPD/SHEPD use Forward Cost Pricing (FCP) Methodology as prescribed with DCUSA Schedule 17* • The latest blank EDCM Model can be found on the DCUSA website** *https: //www. dcusa. co. uk/Site. Pages/Documents/DCUSA-Document. aspx **https: //www. dcusa. co. uk/Site. Pages/Documents/Publications_EDCM. aspx

EDCM - Overview of Import Methodology Network Rates Direct Costs Indirect Costs Scaling NG Exit Allocation Tariff Sole Use Asset Fixed Charge (p/day) Capacity Charge (p/k. VA/day) Super-red Unit Charge (p/k. Wh) Target Revenue Capacity Shared Assets Site Demand Network Use Factors (NUF) Costs on MIC FCP - Local FCP – Remote Super- red k. Wh

EDCM - Overview of Export Methodology Costs Network Rates Direct Costs ‘O&M’ * DG k. VA FCP Local Remote Allocation Tariff Sole Use Asset Fixed Charge (p/day) Target Revenue Capacity Charge (p/k. VA/day) Eligibility for credits Super-red Unit Rate (p/k. Wh) on MEC

FCP Methodology • Forward Cost Pricing calculates incremental charges for the expected cost of reinforcement over ten years – Long Term Development Statement (LTDS) as load data for power flow analysis • FCP identifies future demand-led reinforcement costs to be applied within the charging year • Network Group Levels: Network Group SEPD SHEPD Level 1 Grid Supply Point (132 k. V) Level 2 Bulk Supply Point (33 k. V) Grid Supply Point (33 k. V) Level 3 Primary Substation (33/11 k. V) • The FCP network costs are published on the SSEPD website – Local and remote FCP charge of each network group

FCP Network Group Levels Transmission Customer A Customer B Customer C Local FCP Network Group is a GSP A B C 132 k. V – Level 1 33 k. V – Level 2 33/11 k. V – Level 3 Local FCP Network Group is a BSP Local Level 1 Remote - Level 1 Local Level 2 Remote - Level 2 Local FCP Network Group is a Primary Substation Local - Level 3 Remote - Level 1 Local Level 3 e. g. 132/11 k. V

Eligibility for EDCM Export Credits • Eligibility for export credits is prescribed within DCUSA Schedule 17: – Eligible for credits if the F Factor assigned is non-zero – Not eligible for credits if the F Factor assigned is zero • The F Factor is determined using ER P 2/6 guidance Ø Eligibility for battery storage is determined as above • Credits for generators will apply as below: Customer: Zero F Factor Customer: Non-Zero F Factor Local FCP Charge No credit for export during superred time period Credit for export during super-red time period No Local FCP Charge No credit for export during superred time period Remote FCP Charge No credit for export during superred time period Credit for export during super-red time period No Remote FCP Charge No credit for export during superred time period Note: See paragraph 6. 3 and Annex 1 – 5. 3 (Schedule 17)

Super-red time periods – SHEPD From 1 st April 2017 Scottish Hydro Electric Power Distribution plc – effective between 1 st April 2016 and 31 st March 2017 Scottish Hydro Electric Power Distribution plc – effective from 1 st April 2017 Time Periods for Designated EHV Properties Time periods Super Red Time Band Monday to Friday (Including Bank Holidays) October to March 12: 30 - 14: 30 Monday to Friday (Including Bank Holidays) November to February 16: 00 - 19: 00 Notes All the above times are in UK Clock time Notes 16: 30 – 21: 00 All the above times are in UK Clock time Ø SHEPD super-red time periods reviewed and effective from 1 st April 2017

EDCM Data Outputs – Import Tariff Charges Import LLFC Import MPANs/MSIDs Tariff NNN NNN NNN 17 NNNN NNNN NN 17 NNNN NNNN NN 17 NNNN NN 1 2 3 4 5 6 7 8 9 10 0. 000 5. 515 0. 545 0. 000 0. 549 0. 000 10981. 33 6936. 35 4295. 93 1. 65 5. 39 55. 65 5734. 50 463. 81 8857. 83 6234. 44 Import Capacity Charge (p/k. VA/day) Import Exceeded Capacity Charge (p/k. VA/day) 3. 38 3. 59 2. 98 3. 46 2. 17 3. 26 1. 49 7. 37 2. 95 5. 40 Import Super-red unit Import Fixed Charge (p/k. Wh) (p/day) 3. 38 3. 59 2. 98 3. 46 2. 17 3. 26 1. 49 7. 37 2. 95 5. 40 Tariff Component Unit Comments Super-red unit Charge p/k. Wh Reflects the remote element of the FCP network costs (charge 1) Import Fixed Charge p/day Recovery of direct operating costs and network rates associated with the sole use assets of the site Import Capacity Charge Exceeded Import Capacity Charge Reflects the local element of the FCP network costs, direct p/k. VA/day operating costs, indirect costs, network rates, transmission exit costs and scaling p/k. VA/day Charged at the same rate as the import capacity charge (except for sites with demand side management agreements)

EDCM Import Annual Charge – Site Parameters • Change in MIC will affect the Import Capacity Annual Charge • Change in Super-red import consumption will affect the Super-red unit Annual Charge Import Fixed Annual Charge (£/year) Exceeded Import Capacity Annual Charge (£/k. VA/year) Increase MIC (£/k. Wh) Decrease MIC Super-red unit Annual Charge Increase import k. Wh in super-red time period Decrease import k. Wh in super-red time period Ø Changes in the MIC and/or Super-red import consumption may affect charging rates in future years Ø Demand Side Management agreement would reduce the Import Capacity Charge Rate but may increase the Exceeded Import Capacity Charge Rate if there is an FCP charge Note the above examples are following the general principles of the methodology

EDCM Data Outputs – Export Tariff Charges Export LLFC Export MPANs/MSIDs Tariff NNN NNN NNN 17 NNNN NNNN NN 17 NNNN NNNN NN 17 NNNN NN 1 2 3 4 5 6 7 8 9 10 0. 000 -0. 521 0. 000 0. 000 Export Capacity Rate (p/k. VA/day) Export Exceeded Capacity Rate (p/k. VA/day) 0. 00 0. 05 0. 05 Export Super-red unit Export Fixed Charge Rate (p/k. Wh) (p/day) 0. 00 0. 05 0. 00 827. 42 0. 00 315. 07 186. 15 1, 919. 05 235. 90 234. 03 235. 43 468. 06 Tariff Component Unit Comments Export Super-red unit Rate p/k. Wh (negative) Reflects both local and remote elements of the FCP network costs (charge 1) Export Fixed Charge p/day Reflects Sole use asset charge for direct operating costs and network rates Export Capacity Charge p/k. VA/day Reflects scaling and O&M costs Exceeded Export Capacity Charge p/k. VA/day Charged at the same rate as the export capacity charge (except for sites with generation side management agreements)

EDCM Export Annual Charge– Site Parameters • Change in MEC will affect the Export Capacity Annual Charge • Change in Super-red export consumption will affect the Super-red unit Annual Rate Export Fixed Annual Charge (£/year) Exceeded Export Super. Export Capacity red unit Annual Charge Rate (£/k. VA/year) Increase MEC Decrease MEC (£/k. Wh) Increase export k. Wh in super-red time period Decrease export k. Wh in super-red time period Ø Changes in the MEC may affect charging rates in future years Ø Super-red export consumption will not affect the charging rates in future years Ø Generation Side Management agreement to export during National Grid supergrid transformer conditions would decrease the Exceeded Export Capacity charging rate Note the above examples are following the general principles of the methodology

CDCM / EDCM DUo. S Charges Publication and Worked Examples

Publication of DUo. S Charges Ø Final DUo. S charges are published 15 months in advance of the implementation date – calculated on an annual basis and published no later than 31 st December Ø Charges are outlined in the Use of System Charging Statement, which are published in a standard format approved by Ofgem: § Annex 1 – LV & HV Charges (CDCM) § Annex 2 – EHV Charges (EDCM) § Annex 4 – LDNO Charges (CDCM and EDCM) Ø Charges within the statement are shown exclusive of VAT Ø All charging documents are publicly available on the SSEPD website https: //www. ssepd. co. uk/Library/Charging. Statements/

Charge Calculator Ø Charge Calculator tool available within Schedule of Charges and Other Tables (SCOT) spreadsheet Ø Allows customers to estimate their DUo. S charge over a particular consumption period Ø Demonstration of worked examples: Ø CDCM Ø EDCM Ø SHEPD 16/17 SCOT - Charge Calculator: https: //www. ssepd. co. uk/Work. Area/Download. Asset. aspx? id=7140

Questions?

Contact – SHEPD Use of System Charges Ø If you have any questions regarding Distribution Use of System Charges in SHEPD: Angus Rae Commercial Policy Manager Scottish Hydro Electric Power Distribution plc Inveralmond House 200 Dunkeld Road Perth PH 1 3 AQ Email: angus. rae@sse. com Telephone: 01738 456308

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