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DCP178 – Consultation One Questions and Responses

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DCP178 – Consultation One Questions and Responses DCUSA Consultation DCP 178 DCUSA DCP 178 Consultation Responses – Collated Comments PART 1 Party Response Working Group Comments Question One Do you support this change? Working Group summary: It was noted that customers are broadly supportive of DCP 178, with no respondents to this question against the proposal. Anonymous Yes Noted Anonymous Yes. Noted Anonymous Yes Noted Anonymous yes Noted BT Group plc Yes Noted GlaxoSmithKline Yes Noted Dwr Cymru Cyf Yes - a fairer solution for customers, suppliers, distribution companies Noted and customers. As a participant in the working group we have had excellent exposure to the argument for and against and support the final proposition. Associated British Foods Yes Noted CEMEX UK Operations Ltd Yes Noted Consumer Futures Yes – although we note that this change addresses a symptom of a Noted wider problem, rather than the problem itself. We expand on this in Q7 below. LASER Energy Buying Group Yes Noted (a division of Commercial Services Kent Ltd – wholly owned by Kent County Council) Major Energy Users Council Yes Noted Opus Yes Noted 08 November 2013 Page 1 of 59 DCP 178 V1.0 DCUSA Consultation DCP 178 Question Two What benefits do you believe it will bring to your organisation? It was noted that there were a number of repeating positive themes in the responses to this question, particularly around improved certainty and the benefits for customers in terms of improved budgeting. Anonymous It will allow increased budget certainty as pass through charges will be Noted known for the year in advance Anonymous It can allow your to budget and project your Utliity costs more Noted accurately. For Organisations on shorter fixed contratcs, the potential to know charges well in advance, may allow time to shop around for alternative agreements. Anonymous Certainty in charges Noted Anonymous none Noted BT Group plc This change will provide us with a significant improvement in cost Noted certainty on DUoS charges. The current regime does not provide us with a known value for DUoS until after our budget processes have completed. DUoS represents circa 15% of our total bill (£30m out of £220m) and to have this level of uncertainty is untenable and contrasts significantly with our ability to achieve cost certainty in the wholesale market. GlaxoSmithKline Better long term budget planning Noted Dwr Cymru Cyf Less uncertainty and risk in the budgeting process which currently Noted requires estimates to be calculated in the business plan for half-hourly supplies. Less uncertainty on our wrapped up NHH rates which we have to source as suppliers have to guess what the rates will be at the time we develop the business plan. Associated British Foods Ability to forecast costs more accuratley and more importantly build Noted them into the budgeting process to allow better cost management. CEMEX UK Operations Ltd Will remove this element of risk premium from a 12 month all inclusive Noted contract which should result in a lower price. Will enable a reforecast of charges slightly prior to the start of a calendar financial year rather than after a quarter in. (Assumptions for budgeting a calendar financial year will have already been made, so not much help from that perspective) 08 November 2013 Page 2 of 59 DCP 178 V1.0 DCUSA Consultation DCP 178 Will aid transparency and therefore comparison of supplier products, as an element of their individual risk policies will have been removed. Added benefit being that they may look at other product options to maintain a competitive edge Consumer Futures We consider that more stability in future pricing of distribution charges Noted is likely to benefit consumers, by reducing the risk suppliers would otherwise have to build in to prices. Group LASER Energy Buying We procure electricity on behalf of over 120 local authorities within 10 The Working Group noted this respondent’s distribution areas, on both flexible and fixed contract methods comments particularly highlight the argument in amounting to approximately 2.8 TWh/annum. For both purchasing support of the change. methods, the billed charges are all inclusive, non-pass through rates. Our flexible product, which accounts for over 80% of the energy we purchase, offers validation of the core components to ensure that invoices paid by public sector organisations and end users (such as schools, housing, care homes, street lighting etc) have non-commodity components we are able to evidence and justify back to regulated charges. With the current method of releasing DUoS charges, the supplier takes a view on what to apply for any portion of a contract year beyond the expiry date of the prevailing DUoS pricing period. This reduces the transparency of DUoS charges within overall delivered energy prices. This change will benefit the public sector organisations we represent in our flexible product by providing greater transparency between the published DUoS charges and the associated cost recoveries included within the delivered energy price. The distribution charge is the highest non-commodity component cost to an end user thus any further solidity and removal of risk applied by the supplier within the charges will no doubt benefit the justifiability and end cost. Furthermore, we support the idea that it will aid competition within our fixed product by eliminating the need for suppliers to take a view on much, if not all, of a requested contract period’s distribution charges when releasing a tender on behalf of an authority. Major Energy Users Council We have sought the opinion of a number of our members ranging from Noted 08 November 2013 Page 3 of 59 DCP 178 V1.0 DCUSA Consultation DCP 178 large single site to multi site organisations. All agree that this will assist them in a number of ways. Tariffs should be more predictable and transparent and there should be improved certainty over budgeting for future DUoS charges. Removal of one element of suppliers risk might even lead to reductions in the charges some customers pay for DUoS in their contract. Many DNOs are predicting tariffs for the period 2015 - 2023 (subject to inflation indexing) so improved transparency would be beneficial. End users with pass-through contracts should benefit from being able to budget with greater certainty. Finally consumers have often complained that suppliers fail to inform them of new charges in advance of implementation so this would be helpful all round. Opus This change will aid us in offering accurate, more competitive fixed Noted contracts for customers. Question Three Do you agree with the proposed implementation date of December 2014? Please provide your rationale. The Working Group noted that several respondents would have preferred for DCP 178 to be implemented earlier than December 2014, however the publication date of RIIO-ED1 allowed revenues will not permit earlier implementation. The group noted that no respondents wished the change to be implemented later than 2014 and many would prefer it to be earlier. Anonymous Yes Noted Anonymous Yes , this allows for both supplier and end user organisations to plan for Noted a long term strategy. Anonymous Yes, the sooner the better Noted Anonymous yes Noted BT Group plc We would prefer it to be in December 2013. However, we understand Noted the logistical challenges in achieving this, including the reliance on Ofgem to adhere to their timetable for RIIO, and would support December 2014 to enable the industry to prepare properly. Dwr Cymru Cyf Yes. It should be implemented as soon as feasible. Noted Associated British Foods We would like this change to be implemented as soon as possible, Noted preferrably December 2013 or April 2014. CEMEX UK Operations Ltd In the context of a 15 month notification period then yes enabling Noted 08 November 2013 Page 4 of 59 DCP 178 V1.0 DCUSA Consultation DCP 178 effectiveness from April 2016. Can’t be any earlier for reasons identified and should not be permitted to be delayed further over a time when there will potentially be enough other uncertainties surrounding electricity. Consumer Futures We are not in a position to comment on the proposal in this level of Noted detail. Group LASER Energy Buying Yes. Noted It is the next allowable date following the notification of the revenue change (RIIO-ED1) from OFGEM in February 2014 (at the earliest). Major Energy Users Council There seems no reason to delay implementation from a consumer’s Noted perspective. Opus Yes, this change will offer more security to fixed contracts when Noted entering RIIO EDI. Question Four Do you believe that the April 2015 tariffs published in December 2014 should be final tariffs, rather than indicative tariffs? The group noted that respondents supported this suggestion. Anonymous Yes Noted Anonymous If they are final tarrifs, this will then not allow for any potential Noted downward pressure on tariffs. Similarly it places greater risk on the Energy supplier, should prices take a severe upturn. Anonymous Yes Noted Anonymous yes Noted BT Group plc Yes. The whole point of the change is to provide cost certainty - whilst Noted accepting that they would be published earlier than currently required by DCUSA, the intention of this change is to make sure that the charges are settled once. GlaxoSmithKline Final tariffs Noted Dwr Cymru Cyf Yes - otherwise it operates the same as an estimate and is not a Noted substantial improvement on the current system. Associated British Foods Yes. Noted 08 November 2013 Page 5 of 59 DCP 178 V1.0 DCUSA Consultation DCP 178 CEMEX UK Operations Ltd Yes as provides consistency with other proposed changes and no reason Noted to delay if DCP 178 is to be implemented Consumer Futures We are not in a position to comment on the proposal in this level of Noted detail.
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