Forecast TNUoS Tariffs for 2019/20 April 2018 NGET: Forecast TNUoS Tariffs for 2019/20 June 2017 1 Forecast TNUoS Tariffs for 2019/20 This information paper provides National Grid’s April Forecast Transmission Network Use of System (TNUoS) Tariffs for 2019/20, applicable to transmission connected Generators and Suppliers, effective from 1 April 2019. April 2018 April 2018 Contents Contact Us 4 Executive Summary 5 Changes since the previous demand tariffs forecast 9 Gross half hourly demand tariffs 9 Embedded export tariff 10 NHH demand tariffs 12 Generation tariffs 14 Generation wider tariffs 14 Changes since the last generation tariffs forecast 15 Generation wider zonal tariffs 15 Onshore local tariffs for generation 17 Onshore local substation tariffs 17 Onshore local circuit tariffs 17 Offshore local tariffs for generation 19 Offshore local generation tariffs 19 Background to TNUoS charging 20 Generation charging principles 20 Demand charging principles 24 HH gross demand tariffs 24 Embedded export tariffs 24 NHH demand tariffs 25 Updates to revenue & the charging model since the last forecast 25 Changes affecting the locational element of tariffs 25 Adjustments for interconnectors 26 RPI 26 Expansion Constant 27 Local substation and offshore substation tariffs 27 Allowed revenues 27 Generation / Demand (G/D) Split 28 Exchange Rate 28 Generation Output 28 Error Margin 28 Charging bases for 2019/20 28 Generation 29 Demand 29 NGET: TNUoS Tariffs for 2019/20 April 2018 3 Annual Load Factors 30 Generation and Demand Residuals 30 Small generator discount 31 Tools and Supporting Information 32 Appendices 33 Appendix A: Changes and possible changes to the charging methodology affecting 2019/20 TNUoS Tariffs 34 Appendix B: Locational demand tariff charges 36 Appendix C: Locational demand profiles 37 Appendix D: Annual Load Factors 38 ALFs 38 Appendix E: Contracted generation changes since the November forecast 44 Appendix F: Transmission company revenues 45 National Grid revenue forecast 45 Scottish Power Transmission revenue forecast 47 SHE Transmission revenue forecast 47 Offshore Transmission Owner & Interconnector revenues 47 Appendix G: Generation zones map 49 Appendix H: Demand zones map 50 50 Appendix I: Parameters affecting TNUoS Tariffs 51 Contact Us If you have any comments or questions on the contents or format of this report, please don’t hesitate to get in touch with us. This report and associated documents can also be found on our website at www.nationalgrid.com/tnuos . Team Email & Phone [email protected] 01926 654633 NGET: TNUoS Tariffs for 2019/20 April 2018 4 Executive Summary This document contains the latest forecast of the Transmission Network Use of System (TNUoS) Tariffs for 2019/20. These tariffs will apply for the charging year starting 1 April 2019. TNUoS charges are paid by transmission connected generators and suppliers for use of the GB Transmission networks. The tariffs for 2019/20 were last forecast in generation tariff to be £6.02/kW. This is an our November 2017 Five-Year forecast. The increase of 1p/kW since the November next forecast will be in June 2018. forecast, and an increase of 4p/kW compared to 2018/19. Total Revenues to be recovered We forecast the total Transmission Owner Demand Tariffs (TO) allowed revenue to be recovered from We forecast the revenue to be recovered TNUoS charges to be £2,835.8m in from demand tariffs to be £2,404m in 2019/20. This is £132.5m less than the 2019/20. This is a decrease of £122m November forecast, and £165.5m more than compared to the November forecast. 2018/19. We will be revising this figure throughout the year and it will be confirmed We now have the system demand data for in the final tariffs report. winter 2017/18, and have prepared a revised forecast of chargeable demand Generation Tariffs using our Monte Carlo model. We have also We forecast that generation tariffs will adjusted our forecast based on P3392 which recover £431.8m. This is to ensure that factors in the expected HH/NHH demand average annual generation tariffs remain shift we are seeing during settlement. below the €2.5/MWh limit. This limit is set by European Commission Regulation (EU) No We are forecasting a gross system peak of 838/2010 using the methodology defined in 51.3GW. This is a +0.1GW increase since the CUSC. This figure has reduced by the November forecast. Gross HH demand £11.7m compared to the November is forecast to be 18GW (-1.8GW) and NHH forecast, due to a revised exchange rate demand is forecast to be 25.5TWh being published by the OBR1. The Error (+2TWh). The switch from HH to NHH Margin applied in the G/D split calculation demand is due to P339. remains fixed at 21%. The winter of 2017/18 saw high Embedded The chargeable TEC for 2018/19, we Export volumes at Triad of just short of forecast to be 71.7GW. This is a decrease 8GW, compared to 6.25GW in 2016/17. of 2.1GW compared to the November This has led us to update our forecast of forecast. We forecast the average Embedded Export volume for 2019/20 to 7.8GW (+1.7GW). 1 Office for Budget Responsibility, Economic and Fiscal Outlook, March 2018. http://obr.uk/efo/economic-fiscal- 2https://www.elexon.co.uk/mod-proposal/p339/ outlook-march-2018/ NGET: TNUoS Tariffs for 2019/20 April 2018 5 our Final tariffs in January 2019, as final We now forecast that £111m will be payable allowed revenue is only provided to us in through the Embedded Export Tariff (EET), late January. compared to £82m in our November forecast. Small Generator Discount The Small Generator Discount, is defined in The average forecast gross HH demand National Grid’s licence condition C13. This tariff is £49.35/kW. The average forecast licence condition expires on 31 March 2019. EET is £14.30/kW. The average forecast Previously a discount was applied to NHH demand tariff is 6.38p/kWh. Our new TNUoS tariffs for transmission connected forecast sees the average HH and NHH generation <100MW, connected at 132kV. tariffs reduce since November by £1.81/kW and 0.57p/kWh. Due to change in locational From 2019/20, no discount will be applied to demand tariffs and volumes, our forecast of generator tariffs, and no rebate rates will be the average EET has increased by applied to demand tariffs. £1.02/kW compared to November. Changes to the Charging Methodology Drivers of changes to the Tariff forecast which may affect 2019/20 tariffs The principal drivers for change between The Charging Methodology can be changed our April and November tariff forecast are: through modifications to the CUSC. There An increase in the forecast volume of are several such proposals currently being Embedded Export. considered. If approved, these may affect A lower total revenue forecast, tariffs for 2019/20 onwards. primarily due to decreases in expected OFTO and National Grid Judicial Review of CMP264/265 ETO revenues. From 2018/19 the demand charging methodology changed to charge on Gross Future Forecasts HH demand, with a credit for Embedded In Appendix I we show how we intend to Export. This decision remains subject to update the various parameters which affect judicial review. Hearings have taken place charging in future forecasts. For our future between 25th-27th April 2018 and a decision forecasts, all parameters affecting both is pending. generation and demand tariffs may be updated. If Ofgem’s decision to approve the modification is quashed, then we may need In our next June forecast, we intend to fix to set tariffs for 2019/20 on the previous net the total revenue paid by generation. We methodology. This may also affect 2018/19 also intend to fix the chargeable demand tariffs through a ‘mid-year tariff change’ forecast. In the November forecast, the intention is for the locational tariffs to be finalised. The residual tariffs will vary until NGET: TNUoS Tariffs for 2019/20 April 2018 6 Feedback Other modifications We welcome feedback on any aspect of this document and the tariff setting processes. CMP251. A methodology to change the Do let us know if you have any further calculation of the total generation TNUoS suggestions as to how we can better work revenue, and introduce ex-post with you to improve the tariff forecasting reconciliation of generator charges to process. €2.50/MWh. This modification is pending Ofgem’s decision. CMP280. Seeks to charge Generator Users a new tariff for demand, which removes the liability for demand residual charges. A workgroup is currently considering this modification. CMP286, CMP287 and CMP292. These modifications seek to fix elements of the charging methodology during the tariff setting process. This includes Allowed Revenue, parameters such as chargeable demand, and the methodology itself. These modifications are discussed in more detail in Appendix A and are being considered by workgroups. Other modifications may also be proposed which may affect tariffs from 2019/20. Next forecast Our next publication of 2019/20 TNUoS tariffs will be the June forecast. The latest tariff forecast timetable can be found on our website.3 3 Our revised forecast publication timetable is available on our website: http://www.nationalgrid.com/tnuos NGET: TNUoS Tariffs for 2019/20 April 2018 7 Demand Tariffs Tables 1, 2 and 3 show demand tariffs for Half-Hourly, Embedded Export and Non-Half-Hour metered demand. The breakdown of the HH tariff into the peak and year round components can be found in Appendix B. Table 1: Summary of Demand tariffs 2019/20 - 2019/20 HH Tariffs Initial April Change Average Tariff (£/kW) 51.161915 49.346251 -1.815664