Energy Networks Association (2008-2009) Development of common distribution charging methodology (CDCM) and model
Reckon assisted the regional electricity distribution network operators in Great Britain on the development and implementation of a common method for determining the structure of charges for use of their networks at lower voltages (typically LV and 11 kV).
The companies, working with the regulator, developed a common charging method to replace the previous complex patchwork of existing tariffs and cost allocation rules.
Our role was to:
- Participate in industry working group meetings/teleconferences and in meetings with the regulator to determine the common methodology.
- Develop and distribute a spreadsheet modelling system that was used during the course of the development process as a tool for sensitivity analysis. This spreadsheet was adopted by all companies to use as their published model to set charges under the common method.
One of the main issues arising in the project is the need to ensure that the new tariff structure will not have undue distortionary effects on competition. Smaller "independent" network operators have already raised concerns about the effect of some of the existing tariff structures on their businesses, and significant effort was devoted to understanding these issues and seeking a solution that would be acceptable to all parties and to the regulator.
The project involved innovative use of information technology both for spreadsheet management and to manage a relationship with seven client companies, the regulatory authority and other stakeholders involved in the project:
- A custom system was developed to create Microsoft Excel spreadsheets implementing the common methodology, and the large number of options and variations to the methodology that were considered in the course of the work. The system used a high-level specification of the data structures (data tables) and the operations linking them, combined with purpose-built code in the open source programming language Perl to convert the high-level description into a working Microsoft Excel file. This system also enabled management of input data for the 14 electricity distribution regions for which tariffs were set (as well as multiple variations to the input data for each region).
- A dedicated web page was established as part of Reckon Online to enable stakeholders to build and download spreadsheets implementing drafts of the methodology with options of their choice. A wide variety of options were added to this system (through menus and checkboxes) during the course of the work to enable sensitivity testing.
Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.