Podcast: DCP461 and CMP460 update

0:01:03 – 00:01:10 – Kyle Murchie

Hello and welcome to a Connectology® podcast, I’m Kyle Murchie, and I’m joined by Nikki and Philip. Hi guys.

00:01:10 – 00:01:11 – Nikki Pillinger and Philip Bale

Hello. Hi.

00:01:11 – 00:01:57 – Kyle Murchie

Today we’re going to talk to you about network boundary charges. We have covered this topic before, but we’re wanting to have a little bit more of a conversation about where those two modifications have got to.

The modifications we’re going to talk about are DCP461 and CMP460. So let’s get into it, obviously, these two Mods have been ongoing for a little while now. We wanted to talk about them because one’s now out to consultation and another’s about to go out to consultation shortly, so it’s a good time to get into some nitty gritty and, and find out what’s happening

So, Nikki, with DCP461, that was focused much more on from a distribution perspective, and I think when we last talked about it, there were a lot of options in the table.

00:01:58 – 00:01:59 – Nikki Pillinger

Yes.

00:01:59 – 00:02:00 – Kyle Murchie

So, what’s this consultation looking to find out?

00:02:01 – 00:02:33 – Nikki Pillinger

So, to be honest, there’s still quite a, quite a few options on the table. So, we have at least five.

So, we’ve definitely got rid of two. So, the two options were, if anyone read the consultation, they were 1.3 and 2.3. So that was having it based on essentially like the, the voltage rule, which we’ve kind of discounted now. So, we’ve now gone for 1.1, 1.2, 2.1, 2.2 and 3.1.

00:02:34 – 00:02:35 – Philip Bale

Just to keep it simple.

00:02:36 – 00:03:23 – Nikki Pillinger

So, to kind of expand on that, 1.1 and 1.2, are essentially socializing it via DUoS. So, 1.1 is sort of that complete socialization option, 1.2 is the option to socialize unless it’s feeding a single, the GSP is feeding a single customer. 2.1 and 2.2, are then the CAF solutions, so 2.1 is just a CAF and then 2.2 is considering a capacity threshold, which I think is a, is definitely something that we need in there.

And then 3.1 is a, not a do-nothing option, but it’s a kind of a status quo while having some much clearer guidance, but for how that, that’s administered.

00:03:24 – 00:03:45 – Kyle Murchie

Okay. So quite, quite, still quite a broad range then, although it’s been whittled down, you’ve either got something that’s going to be basically everything DUoS to some extent, most of it CAF or do as we do today, but maybe have some level of alignment, or guidance.

But so, what’s coming out of the working group? Is there a hot favourite or is it quite mixed still?

00:03:46 – 00:04:25 – Nikki Pillinger

I don’t think there is, to be honest, you know, we kind of spend quite a lot of time thinking about, you know, what the options are, what we’re going to present to people. Working group wise, I think, you know, we’ve got a very diverse group of people in the working groups, so I don’t think there’s a clear kind of front runner favourite from that perspective.

My own personal view would probably be that 2.2 is quite a good option, in terms of being palatable to Ofgem, having that CAF with a capacity kind of limit is, is quite, is a good idea to, yeah, in my opinion I think that’s the one I would go for.

00:04:26 – 00:05:12 – Philip Bale

I think you hit the nail on the head around a lot of this is it’s, everyone coming in from different angles will have different views and ultimately whatever is being proposed at an industry level, we do need to consider the impact to the end customer and what is palatable for them. Because obviously if you’re going down a CAF route, then that means that whatever is not being paid for by the person connecting needs to be paid for by somewhere and at which point then the impact of society. So, yeah, I think that’s something that we need to keep on coming back to of, we think the current system is unfair and broken and stifling. We want to move to something that is what we think is better, but in order to implement something is better, we need to consider the end impact on customers generally.

00:05:13 – 00:05:46 – Kyle Murchie

That brings us on actually quite nicely, Philip to CMP460; which, just kind of going back a little bit, the reason for 460 is to look at the bigger picture, I think you know, longer term. It’s a bit of a longer mod; it’s not going to come into force until April potentially.

Yeah, so it’s going to be a bit of a kind of longer run, but with this one, so where are we now? Because there were three options on the table. Obviously with a CUSC Mod, you know, there needs to be an original proposal, it still needs to whittle that down. So, what’s, what’s that looking like?

00:05:47 – 00:07:27 – Philip Bale

So, yeah, I should also say April 27 is potential implementation date for it rather than 26. So in terms of the three options, option one was basically treat everything like an infrastructure asset, so everything that had the capability of being shareable, having more than one customer connected into their, would effectively be treated the same way that we have at the moment with an infrastructure GSP, or an infrastructure asset.

The second proposal was effectively to treat everything like it’s a connection site. So effectively nothing being infrastructure and at which point keeping everything consistent, which I think lots of people didn’t like for obvious reasons of the complexity of what you do at existing infrastructure sites. And option three looked at some form of sharing type aspect of going through and some sort of proportionality to it, which ended up being discounted, I think primarily because it’s quite complicated for a range of different reasons, and one of the complications was – if you consider everything as being thermally driven, that’s one thing, but what do you do when someone has a connection to a GSP that’s driven for m minus two reasons for demand or for fault level or for voltage reasons, and how do you go through and apportion things on those basis?

So, ultimately the front runner from the working group perspective of most people that are in there has been option one, which is basically any asset that could be shareable from an SGT basis would end up being an infrastructure asset and ultimately would be put onto to TNUoS and then paid for ultimately by demand customers.

00:07:28 – 00:08:16 – Kyle Murchie

Yeah, so it’s, it is an interesting one because we’ve, you know, comparing the two, we seem to have almost the same sort of kind of approach where one day they’re going to socialize everything, another’s putting a lot more onto the customer. Although, in this particular case, we’re talking about everything effectively, going with the customer and having no infrastructure sites or that third option, which feels well, and we’ve talked about this before, it feels like probably the right thing to do. It’s probably the best option because it has that balance between your customer triggering some work and therefore they’re taking on some of the burden, but also recognizing that it’s not sensitive to pass everything through to, you know, a small factory which has triggered these works, but being complicated makes it quite difficult to, to develop within a working group.

00:08:17 – 00:08:50 – Philip Bale

And I think you hit the nail on the head there at the moment, is that ultimately SGT charging, predominantly we speak about it from generation terms because on the whole, it’s often generators that trigger new SGTs, that’s going through, or historically, proportionately or more recently has been, but it applies to demand as well as generation. And then the idea of where you set the limits and who’s exposed to that, and a one-megawatt factory or school potentially triggering a 12, 14, 16-million-pound SGT and associated costs for it. So yeah, it gets quite complicated quite quickly.

00:08:51 – 00:09:20 – Kyle Murchie

Yeah, particularly with that postcode lottery, because SGTs are not equal. You know, you and, but at the same time, if you’re building a new substation, there’s very similar shared costs, irrespective of whether you’re putting in a, you know, 460 or 40 in VA transformer. Yeah, you know, it’s not quite as a, a kind of clear cut as the size. So, thinking about where we are now with both those Mods, you know, lots, has lots of progress have been made. But what’s the next step? So, what, where’s 460 at the moment?

00:09:21 – 00:09:44 – Philip Bale

So, 460 is currently in its, consultation stage. I’m just looking at the phone; so it came out on the 28th of January, it runs till the 18th of February 26 in terms of the consultation, we’d encourage people to feedback in and give their views, we will be feeding into that consultation and then hopefully some WACMs will end up coming out from that, and then the work group will end up voting on, on ultimately, the original and the WACMs.

00:09:57 – 00:10:17 – Kyle Murchie

Yeah, it’s a really good point to make that although the originals going forward, based on that feedback that comes through the consultation, one of the members can put forward an alternative and if that gets forced through, that becomes a WACM. So there’s definitely a lot of opportunity to bring back those options that are on the still the table that option two and three or another.

00:10:18 – 00:10:21 – Philip Bale

Or a flavour of them, yeah, absolutely. Something with some checks and balances in there.

00:10:22 – 00:10:28 – Kyle Murchie

Yeah. And same question for you Nikki then on DCP461 – are they out to consultation yet?

00:10:29 – 00:10:33 – Nikki Pillinger

No. So we are aiming to finalize it this week and then get it out ASAP.

00:10:34 – 00:10:48 – Kyle Murchie

Brilliant. So, when this podcast goes out, we’re probably talking, yeah, it might be out now, so yeah, probably second week in February then, looks like that’s when the consultation may go out. And do you have any idea of timeline? How long is it going to be open for, do we know yet?

00:10:49 – 00:10:49 – Nikki Pillinger

I think it’s three weeks.

00:10:50 – 00:11:21 – Kyle Murchie

Three weeks? Okay. It’s likely that, yeah, three weeks, DCP461 will finish a week, maybe two weeks ahead of 461. I’m just conscious that there’s lots of other consultations going on, others that we know about, which we’ll probably talk about on Grid News and Views, so yeah – so what is the ask? You know, do we want people to feed into both? Do you want people to feed into kind of join up and go through trade body? What’s the kind of best approach? If people had limited time, what do we want to get across?

00:11:22 – 00:11:35 – Nikki Pillinger

I think I’d probably; I recommend that people, at the very least, get their views into a trade body, whether it’s Regen, RUK, SEUK, or whatever trade body they might be a part of.

00:11:36 – 00:11:37 – Philip Bale

Others are available.

00:11:38 – 00:12:04 – Nikki Pillinger

If you have got time, you know, we need lots of different views in these consultations, you know, this is a big thing. It’s really important that lots and lots of different people’s voices are heard. So, it can be really beneficial to have those sort of individual responses as well as the, the trade body ones as well. So yeah, if people have got time, appreciate there’s a lot going on at the moment, then yeah, I would recommend people, feed into both.

00:12:05 – 00:13:01 – Philip Bale

So, I think from my perspective, I’d say the working group is primarily made up of obviously NESO, the TOs, the DNOs, and developers and consultants and IDNOs are also involved in the working group. But that’s quite a small segment of society in terms of this, because it will impact demand customers, it will impact obviously bills in the end sort of levels.

So, I think for me, I quite like the consultation to be assessed from all aspects of the energy system to come in and, put views and hopefully that will potentially result in either modifications to the original order, or to the WACM in terms of coming through. Because going back to earlier, being very conscious of, we need to make sure that the proposal that’s going forwards to Ofgem to be voted on is fair and equitable, and ultimately something that they think is the right view for sort of GBPLC?

00:13:02 – 00:13:46 – Kyle Murchie

Yeah, that’s a good point. In these working groups, you always tend to inevitably get the people that are most active in the industry, which tend to be backed by the companies that are most active in the industry and not necessarily the those that are possibly going to be impacted the most. I think with this, both these Mods, it’s worth saying that, you know, there’s lots of projects that have come across this problem before but never accepted; it’s never become contracted because they see the problem and move away and go down a different route. I think the demand in particular; we see a lot of clients that have that same issue where it’s become a barrier they can’t move forward with project, and it then never actually falls onto the official list.

So, there’s a lot of hidden projects that we probably want to draw out of the, of the consultation, which would be great.

00:13:47 – 00:15:20 – Philip Bale

And I think one of the things that I’m hoping that gets picked up in the consultation a little more and I think I’ll be of responding to on there, is potentially with this work of the role of the RESPs; I think the complexity of that is when the RESPs start to really pick up and start to produce outputs in terms of recommendations of what should be done, where and when. There is much more of a focus now on where should there be investment ahead of need. And I think for me, it feels like, with CMP460, if we are going down a route where all assets should be considered as infrastructure, when does it stop?

When does it become a natural barrier where you say, actually it’s not in the interest of customers to have that extra SGT and it’s only providing a benefit for a small section, and what ends up being the wider benefit to the whole country in terms of energy cost and system access and where generation is.

So, it’s a real fine mix around Gate 2. And in terms of what is needed, where and how much, and then future demand, and then looking into all of these things as to what should be built, where and when and what scale and capability. And potentially for me, if the RESPs can end up feeding into that, we may well get that balance between doing the right thing of preventing the postcode lottery and stifling projects until something happens, which changes the substation to infrastructure and potentially allow the logical thing to happen earlier, which ends up being better, sort of holistic view and costless aspects.

00:15:21 – 00:15:35 – Kyle Murchie

Great. So, we’ve covered quite a lot, maybe just as a quick fire, to kind of round it off. So, if you had to choose one option that was on the table, either from DCP461 or 460, what would it be, Nikki?

00:15:36 – 00:16:27 – Nikki Pillinger

I would use the CAF with a capacity threshold, and I would probably set this capacity threshold fairly high maybe at 10, or maybe not including the 11kV projects or something like that, just to kind of exclude those smaller customers, you know, sort of community initiatives, smaller projects that just don’t really need to be looking into this, and yeah, it’s, it seems to me like the most kind of, I guess they like the, the best option for the end consumer.

While DNUoS also be a good option for developers, I think equally kind of developers are okay with paying for reinforcement as long as they know what that’s going to be. You know, it’s that kind of having a, a very high upper limit of that reinforcement that’s not palatable for most developers. So, yeah, probably…

00:16:28 – 00:16:31 – Kyle Murchie

And that certainty as well, that doesn’t change here.

And the same question?

00:16:32 – 00:17:23 – Philip Bale

I love the idea of a CAF and the engineer in me feels like it is the best and the fairest way of going through and doing it. Based on the work in 460, my concern is that there are too many ifs and buts and ands and exceptions, which then means that that might be incredibly challenging.

So I think ultimately, I am broadly supportive of option one, which is the sort of original proposal, which is everything becoming an infrastructure asset – as long as there is the checks and balances in there, that then makes it a palatable option with the expectations that if those costs are being saved in one area, it should result in lower cost of energy for others.

And I think there is just some, some elements that are needed to stop people gaming the system on that basis. So that’s where I’d like to go is a modified version of option one if we end up doing a WACM on that basis.

00:17:24 – 00:17:45 – Kyle Murchie

Brilliant. Well, hope that has helped clarify what these Mods are and where we are, where we’re at.

Also really importantly, those, consultations will probably be both open by the time this goes out, and we would really appreciate the industry kind of coming together and feeding in. So, thanks very much Nikki, thank you very much Phillip. And we’ll see you in the next one.

00:17:46 – 00:17:46 – Philip Bale

Thanks a lot.

00:17:46 — 00:17:47 – Nikki Pillinger

Thanks.