FCC Baseline Analysis Obligated vs Peak vs Enduring Scenario Place - PowerPoint PPT Presentation

FCC Baseline Analysis Obligated vs Peak vs Enduring Scenario Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. UNC Mod 0621 Analysis 12/04/2018

FCC Baseline Analysis – Background / Assumptions Analysis List #1 � To look at whether using Historic Peak Flow FCC scenario is a better alternative to � our previously suggested “Enduring Baseline Scenario” (where FCC is flows for all entry and exit points, except DN offtakes where FCC is equal to the previous years bookings) � “Historic Peak Flow” refers to the peak day flows from the previous gas year Assumptions � � Used the 2019/20 Transitional parameters from CWD model (i.e. Model reset to transitional period) for each scenario � Historic Flows and Historic bookings are from 2019/20 FCC sheet � Peak Flows from 2016/17 Gas Year have been used 2

FCC Baseline Analysis – Entry Firm Prices 0.1000 0.0900 0.0800 Firm Price (p/kWh/d) 0.0700 0.0600 0.0500 0.0400 0.0300 0.0200 0.0100 0.0000 Entry Point Obligated Firm Price Peak Flow Firm Price Enduring Firm Price 3

FCC Baseline Analysis – Entry Revenue Recovery £500,000,000 £400,000,000 £300,000,000 £200,000,000 Revenue (£) £100,000,000 £- Obligated FCC Scenario Peak Flow FCC Scenario Enduring FCC Scenario -£100,000,000 -£200,000,000 -£300,000,000 Target Revenue Revenue Recovered Over/Under Recovery 4

FCC Baseline Analysis – Exit Firm Prices 0.0300 0.0250 Firm Price (p/kWh/d) 0.0200 0.0150 0.0100 0.0050 0.0000 Exit Category Obligated Firm Price Peak Flow Firm Price Enduring Firm Price 5

FCC Baseline Analysis – Exit Revenue Recovery £500,000,000 £400,000,000 £300,000,000 Firm Price (p/kWh/d) £200,000,000 £100,000,000 £- Obligated FCC Scenario Peak Flow FCC Scenario Enduring FCC Scenario -£100,000,000 -£200,000,000 -£300,000,000 Target Revenue Revenue Recovered Over/Under Recovery 6

Future Impact of Existing Contracts on Enduring Firm Price Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. UNC Mod 0621 Analysis 10/04/2018

Existing Contracts – Background / Assumptions Analysis List #5 � Look at the existing contracts values past the 2021/22 period and determine the � impact this has on entry firm prices during the enduring period Assumptions � � Used the 2021/22 Enduring parameters from the CWD models (i.e. reset model to the enduring period) � For each scenario the model has been reset (to the above), existing contracts for 2021/22 have been replaced by the 2025/26 and 2029/30 (for respective scenarios) existing contract amounts, which includes; � Individual entry point bookings � Total capacity bookings � Total revenue values 8

Existing Contracts – Total Capacity and Revenue through from 2016/17 to 2029/30 5,000,000,000 £90,000,000 4,500,000,000 £80,000,000 4,000,000,000 £70,000,000 3,500,000,000 Total Revenue (£/annum) Total Capacity (kWh/d) £60,000,000 3,000,000,000 £50,000,000 2,500,000,000 £40,000,000 2,000,000,000 £30,000,000 1,500,000,000 £20,000,000 1,000,000,000 £10,000,000 500,000,000 - £- Gas Year Total Capacity Total Revenue 9

Existing Contracts – Impact on Firm Prices 0.0900 0.0800 0.0700 Firm Price (p/kWh/d) 0.0600 0.0500 0.0400 0.0300 0.0200 0.0100 0.0000 Entry Point 2021/22 2025/26 2029/30 10

Impact of the Optional Charge on Revenue Recovery Rates Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. UNC Mod 0621 Analysis 10/04/2018

Optional Charge Impacts – Background / Assumptions Analysis List #8 � Assess the impact of the Optional Charge on revenue recovery rates for both Entry � and Exit Assumptions � � Used the revenue recovery rates out of the CWD model to identify which current OCC rates would be valid for the new OC rate � We have combined the Entry and Exit Non-IP commodity charge to generate a combined rate in the Optional Charge comparison � The OCC forecast flows and revenues have been used from the October 2017 charging process � RPI has been applied to the Optional Charge Formula, and it is only applicable to routes under 60km distance, in line with the 0621 proposal 12

Optional Charge Impacts – Optional Charge Inputs Due to the different revenue recovery mechanisms at Non-IP and IP the Optional � Charge forecast revenues and flows has to be splits into Entry and Exit as well as Non-IP and IP. This allows; � Non-IP commodity charge (entry and exit) target revenue and denominator to be reduced by the necessary values � IP capacity revenue recovery charge target revenue and denominator to be reduced by the necessary values � The inputs for the relevant charge are in the table below Non-IP Flows Non-IP IP Flows IP Revenues (GWh/annum) Revenues (GWh/annum) (£) (£) Entry 150,673 £7,351,819 3,832 £189,062 Exit 102,698 £7,253,764 51,807 £285,017 13

Optional Charge Impacts – Entry Revenue Recovery Rates 0.0450 25.00% 0.0400 20.00% 0.0350 Revenue Recovery Rate (p/kWh) Percentage Change (%) 0.0300 15.00% 0.0250 0.0200 10.00% 0.0150 0.0100 5.00% 0.0050 0.0000 0.00% 2019 2020 2019 2020 IP Non-IP Point Categorisation and Applicable Year Optional Charge Included - No Optional Charge Included - Yes % Difference - Yes 14

Optional Charge Impacts – Exit Revenue Recovery Rates 0.0350 80.00% 70.00% 0.0300 Revenue Recovery Rate (p/kWh) 60.00% 0.0250 Percentage Change (%) 50.00% 0.0200 40.00% 0.0150 30.00% 0.0100 20.00% 0.0050 10.00% 0.0000 0.00% 2019 2020 2019 2020 IP Non-IP Point Categorisation and Applicable Year Optional Charge Included - No Optional Charge Included - Yes % Difference - Yes 15

Difference between the Transitional and Enduring Periods Place your chosen image here. The four corners must just cover the arrow tips. For covers, the three pictures should be the same size and in a straight line. UNC Mod 0621 Analysis 10/04/2018

Transitional vs Enduring – Background / Assumptions Analysis List #6 � Assess the impact of the FCC change between Transition and Enduring period by � keeping all other variables the same Graphs show the Firm and Combined (Firm + Revenue Recovery) rates for � transitional and enduring period � Assumptions � Used the 2019/20 Transitional parameters from CWD model (i.e. Model reset to transitional period) for both scenarios � Obligated levels have been used for the transitional FCC � The revenue recovery rates for the transitional period have been taken from the anticipated revenue recovery sheets using the anticipated booking scenario and excluding Optional Charge � Enduring Capacity Scenarios have been used for the Enduring FCC � The under- recovery (from Storage and Interruptible discounts) has been “re - run” through the model using the “Calculate Adjustment” button, to calculate a revenue Adjustment Figure 17

Transition vs Enduring – Entry Prices 0.1200 0.1000 0.0800 Price (p/kWh) 0.0600 0.0400 0.0200 0.0000 Entry Point Transitional Firm Transition Combined Enduring Firm Enduring Combined 18

Transition vs Enduring – Exit Prices 0.0400 0.0350 0.0300 Average Price (p/kWh) 0.0250 0.0200 0.0150 0.0100 0.0050 0.0000 Exit Category Transition Firm Transitional Combined Enduring Firm Enduring Combined 19