RIIO-T1 and GD1: Draft licence conditions – First informal ... - Ofgem

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26 RIIO-T1 and GD1: Draft licence conditions – First informal licence drafting consultation Special Condition D9 (J7 for SPTL and SHETL): Capital Expenditure Incentive and Safety Net) [ETC 70] Drafting status: Proposal to delete. 2.55. TPCR4 and TPCR4 Adapted Rollover capital expenditure incentive revenue adjust ment (sometimes referred to as Work in Progress (WIP)) will form part of the calculations made in ETC 64: Legacy price control adjust ments – Transmission Owner. As such, any adjust ment to allowed revenue will be via the Annual Iteration of the Price Control Financial Model (PCFM). 2.56. We expect the capital expenditure incentive revenue adjust ments to be calculated in line with the policy set out in the TPCR4 29 and Rollover 30 Final Proposals documents, and based on the approach set out in licence conditions 31 that were in force at 31 March 2012. 2.57. We therefore propose to delete this condition. The close out of this scheme will be handled through the new special condition ETC 64: Legacy price control adjust ments – Transmission Owner. Special Condition D11 (J12 for SPTL and SHETL): Adjustment to the Transmission Network Revenue Restriction due to Transmission Asset Owner Incentives [ETC 52] Drafting status: We will provide a working draft in the Second Consultation. 2.58. SpCs D11 (NGET) and J12 (SHETL and SPETL) are the existing SpCs that govern the Transmission Invest ment Incentives (TII) framework (the TII condition). This section covers the proposed changes to the TII licence condition for all three electricity transmission Licensees. 2.59. The TII condition was introduced into the licence on 1 April 2010 to reflect the TII framework for providing project-specific, interim funding for critical large-scale invest ments within TPCR4. The TII condition was subsequently modified f or application in the TPCR4 rollover year 2012-13. 2.60. The TII condition provides for cost recovery by the three electricity transmission Licensees in relation to specific pre-construction and construction works for which the Authority determines capital expenditure allowances covering planned expenditure in one or more financial years up to and including 201/13. It also includes mechanisms for adjusting allowances, and associated deliverables, and for 29 Transmission Price Control Review: Final Proposals, Ref: 206/06, December 2006 http://www.ofgem.gov.uk/Networks/Trans/Archive/TPCR4/ConsultationDecisionsResponses/Documents1/1 6342-20061201_TPCR%20Final%20Proposals_in_v71%206%20Final.pdf 30 TPCR4 Rollover: Final Proposals, November 2011, http://www.ofgem.gov.uk/Networks/Trans/PriceControls/TPCR4Rollover/Documents1/TPCR4_Rollover_Final_Proposals.pdf 31 Special Condition J7 and D9 for SPTL, SHETL and NGET respectively.
RIIO-T1 and GD1: Draft licence conditions – First informal licence drafting consultation annual reporting on expenditure against allowances and progress against deliverables. 2.61. The TII framework is being superseded by the arrangements for Wider Works under RIIO-T1. The Wider Works arrangements are covered separately in the new SpCs discussed below. 2.62. However, certain provisions within the current TII condition will need to be retained under RIIO-T1, specifically: � the adjust ment mechanisms and reporting arrangements, as they apply to relevant works undertaken in 2012/13, and � the provisions, which were introduced as part of the modifications to this condition for 2012/13, for future revenue adjust ments to be made under RIIO-T1. 2.63. The future revenue adjust ments referred to above relate to the: � “true-up” of revenues to account for the final values (including any adjust ments under the above mechanism) of the relevant capital expenditure allowances where those differ from the values assumed or taken into account in setting the allowed revenue for the relevant year, and � application of the capital efficiency incentive to the relevant works. 2.64. Therefore, we will retain an amended version of the TII condition into RIIO-T1 which will reflect the above and include a process for closing TII projects. Based on this process, a value will be determined which then, through a separate licence condition 32 , would adjust allowed revenue via the annual iteration of the PCFM. Special Condition AA5A: Balancing Services Activity Revenue Restriction [ETC 12] [NGET only] Drafting status: Current working draft provided in Supporting Document 1. 2.65. This condition calculates maximum SO revenue the Licensee is allowed to recover from customers. 2.66. We propose to change the title of this condition from „Balancing Services Activity Revenue Restriction„ to „Restriction on System Operator Internal Revenue‟. 2.67. In order to improve readability we have split this condition into internal and external revenues and propose to restructure (see Table 2 below). 32 ETC 64: Legacy price control adjustments – Transmission Owner. 27
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RIIO-T1 and GD1: Draft licence conditions – First informal ... - Ofgem

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