Mod Proposal 0268 AQ Backstop Date Phil Lucas

Mod Proposal 0268 : AQ Backstop Date Phil Lucas (22 October 2009, Solihull)

Background ® AQ is derived from historic consumption ® to represent a view of expected consumption in the next 12 months ® AQs revised on 1 October each year ® Historic consumption adjusted by a Weather Adjusted Annual Load profile (WAALP) to a Seasonal Normal value ® UNC defines which periods are able to be utilised to quantify historic consumption - the ‘Relevant Metered Period’ (UNC H 3. 2)

Relevant Metered Period ® Metered between two reads: ® Ending Meter Read (last valid reading prior to 10 August) ® Target Opening Date (42/50 weeks prior to ending Meter Read for Annual/Monthly Read) ® Earliest possible ‘starting Meter Read’ specified as ® last valid meter read prior to the Target Opening Date (up to 3 years preceding such Date), or ® If no valid reading in this 3 year period, the first valid reading after the Target Opening date, provided that ® the starting Meter Read is no earlier than 1 October 2002 (the ‘AQ backstop Date’)

Existing Backstop Date ® UNC Modification 0018 (2005) ® Impact ® At that point - period that could be used in AQ Calculation (1 October 2002 to March 2005) was 2 years 5 months ® Number of Meter Points that did not calculate as a result was 446 (11 SSP, 435 LSP) ® Representing 0. 01% of 4. 5 million total that did not calculate

Treatment of Un-calculated AQs ® For AQs that are not calculated (i. e. Carry Forward AQs) ® A multiplicative factor per EUC is applied to the current AQ value to adjust from the old SN basis to the new SN basis ® Defined in UNC H 3. 4. 4 (AQ = (Current AQ x (A/B)) ® e. g. An AQ of 20, 000 k. Wh in EUC Band 1 ® Adjusted by multiplying difference between the old aggregate WAALP (eg: 356) and the new aggregate WAALP (eg: 352) ® Result 0. 9888 ® AQ to be effective from 01/10/10 on the new basis is 19, 776 k. Wh

Issue ® As the ‘AQ Backstop Date’ is currently static, it becomes increasingly irrelevant ® Cyclic reading and associated must read provisions effectively move the earliest potential starting Meter Read date forwards ® Maximum gap between readings for Annual Read meter is 2 years ® Maximum gap between readings for Monthly Read meter is 4 months ® Revised WAALPs will apply for 2010 AQ Review as a consequence of the 2010 SN review ® Need to be applied to any retrospective consumption periods that could be utilised within the 2010 AQ Review. Under current terms this is notionally 1 October 2002 ® WAALPs will be recalculated using new SN basis back to 1 st October 2006

Requirements ® Replacement of the existing ‘hard coded’ date with an enduring solution ® A backstop date which rolls forward upon the implementation of revised SN values (as required by H 1. 4. 2) ® This would be 1 October in the 4 th year prior to the start of the Gas Year in which a SN Review becomes effective, and ® the new ‘Backstop Date’ would become effective from 1 st February of the preceding Gas Year (enables the provisional AQs to be calculated using the revised SN values) ® Examples ® For a SN Review which becomes effective from 1 October 2010, from 1 February 2010 the backstop date will be 1 October 2006 ® For a SN Review which becomes effective from 1 October 2015, from 1 February 2015 the backstop date will be 1 October 2011

Consequences of Implementation ® On a normal 5 yearly SN Review cycle, the backstop date would be ® at its shortest point (February prior to SN change effective year) 3 years 4 months ® at its longest point (January prior to SN change effective year) 8 years 4 months ® The impact of this option in regards to AQs not being calculated is anticipated to be small: ® Full detailed impact analysis available on presentation given to DESC in early October ® Seasonal Normal Review 2005: Backstop date change ® Shortest period that could be used (01/10/02 to March 2005) was 2 years 5 months ® Shortest period in this proposal (01/10/2006 to 01/02/2010) will be 3 years 4 months (additional year)

Effect of Implementation

Timetable ® 2 nd October Topic raised & discussed at DESC ® 15 th October UNC Mod raised at UNC Mod Panel – referred to Workstream ® 22 nd October Discuss at Distribution Workstream ® 10 th November Discuss at DESC ® 26 th November Discuss at Distribution Workstream – finalise Workstream Report ® 17 th December Modification Panel consider Workstream Report – issued for consultation ® Mid January Representations close out ® 21 st January Modification Panel make recommendation – Final Modification Report issued to Ofgem ® 11 th February (max) Ofgem determination & Implementation ® 12 th February UK Link system update of backstop begins ® March UK Link system update complete