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

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46 RIIO-T1 and GD1: Draft licence conditions – First informal licence drafting consultation Special Condition C8B: NTS transportation owner activity revenue restriction [GTC 20] Drafting status: Current working draft provided in Supporting Document 2 3.24. The purpose of this condition is to calculate the maximum TO revenue that NGGT is allowed to recover from its customers by bringing together terms from other licence conditions. It also sets out the calculation of the price index adjust ment term used throughout the licence and calculates the correction factor (TOK) for the treatment of over/under recovery of revenue. 3.25. We also propose to amend the title of this condition from „NTS transportation owner activity revenue restriction‟ to „Restriction of NTS Transportation Owner Revenue‟. 3.26. We are also proposing to make the following changes to the terms that make up the revenue restriction formula: � Introducing the term TOBR to allow for the Annual iteration of the Price Control Financial Model. This is a substantial change from previous price controls. Further information on the policy behind this can be found in the RIIO-T1 Finance Supporting Document and for more detail on the licence conditions that will govern the annual iteration process, see Chapter 6 of this consultation � In broad terms, the TOBR term will pick up an opening base revenue allowance which will be set out in the licence. This term will be revised annually by the addition of the TOMOD term, which is derived through the Annual iteration process. The TOMOD term will make adjust ments to NGGT‟s revenue for factors such as: o the totex incentive mechanism o tax o pensions o changes to the cost of debt o the triggering of revenue drivers (eg for entry and exit capacity – which we now expect to be part of the TO revenue restriction) 65 o the triggering of uncertainty mechanisms. � Introducing new terms for schemes and incentives that have been introduced as part of RIIO. This includes a new term for permits (which we propose are funded through the TO rather than the SO as at present). See GTC 131 below for further information on this � Removing schemes that are not part of the RIIO model eg: 65 See Special Condition C8D: NTS gas entry incentives, costs and revenues [GTC3] and Special Condition C8E: NTS gas exit incentives, costs and revenues [GTC4].
RIIO-T1 and GD1: Draft licence conditions – First informal licence drafting consultation o the Innovation Funding Incentive (IFI) in Part 3 of the current condition o the Capex Expenditure Safety Net in Part 5 of the current condition. � Implementing an updated methodology for calculating the price index adjust ment term. This is consistent with the policy as set out in our decision on RPI indexation in July 2011. 66 We have also proposed to update defined terms and introduce additional defined terms � Making provision for price control disapplication in a specific dedicated licence condition see GTC 29: Disapplication � Replacing the term TOF for the pass-through of costs with the term „PT‟ and moving provisions for this into a new specific licence condition, GTC21: Special Allowed pass through items � Removing the term „TOIAT‟ (which currently covers income adjusting events) from licence, and instead making provision for uncertain costs through the TOMOD term in accordance with the new licence condition, GTC28: Uncertain Costs (see below for further information). 3.27. Appendix 4 67 of this document provides more detailed information on how the new proposed licence conditions update or replace existing arrangements under the current condition. 3.28. The effect of the changes to this condition is to enable NGGT to recover revenue streams that are consistent with the RIIO regime as currently set out in the T1 IP Documents 68 . 3.29. There are a number of outstanding issues that we will need to consider by the Second Consultation, including: � whether terms need to be removed or new terms need to be added to reflect any changes to proposed inputs to allowed revenue, as drafting across the range of conditions to be introduced under our proposed Phase 1 is finalised � how the correction factor (TOK) calculation should operate in the light of whatever decision is taken on conclusion of our consultation on mitigating network charging volatility. 66 Decision on RPI indexation method: http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?docid=117&refer=Networks/Trans/PriceControls/ RIIO-T1/ConRes 67 Appendix 4: Special Condition C8B: NTS transportation owner activity revenue restriction 68 RIIO-T1: Initial Proposals for NGGT and NGET - Overview 47
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RIIO-T1 and GD1: Draft licence conditions – First informal ... - Ofgem

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