Ofgem favours P203 (average zonal transmission losses)

Ofgem consultation (85 pages, PDF) on a proposed decision to approve P203 and reject P198, P200, P204 and variants proposals for the allocation of electricity transmission losses in Great Britain.

Ofgem's preferred solution is the RWE proposal, similar to the one it had previously favoured, but with seasonal loss factors. Transmission loss multipliers would be based on marginal losses estimated for four seasons in the year, scaled by a factor of 0.5 so that the total losses allocated in line with zonal loss factors match approximately the total variable thermal losses on the system.

The resulting redistribution of profits between Northern/Scottish and Southern power stations does not concern Ofgem by itself, and Ofgem takes the view that no impact of redistribution on competition or regulatory risk needs to affect its view:

4.39. Having considered the range of respondents' views on the distributional impacts of the modification proposals, on balance, the Authority did not consider that the distributional effects would have a significant negative impact on effective competition. Therefore, the Authority did not consider that a case for phasing or hedging of locational losses can be made based on the distributional impacts.

4.45. Once again, while the Authority agreed with some respondents that the modification proposals may have some impact on perceptions of the stability and predictability of the existing arrangements, on balance the Authority considered that any associated risk is manageable and its impact would be outweighed by the positive impact on competition of introducing locational charging arrangements which are more reflective of costs.

Responses by Tuesday 31 July 2007.

For further information or advice please contact Franck Latrémolière.

Filed under BETTA, Electricity, Ofgem.

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