Decision on changes to licence condition CRC 14 in relation to the DPCR4 losses incentive mechanism
Licence modification
Publication date
Industry sector
Distribution Network
This is our decision to modify EMID, EPN, SPD AND SPMW’s electricity distribution licence, Special Condition CRC 14 (Distribution Charges: supplementary restrictions).
The reason for the decision is to prevent the licensees being unfairly penalised for the under/over recovery of revenue related to the Authority’s decisions on the DPCR4 Losses Incentive Mechanism.
We received three responses to the notice published on 24 July 2014 . All of the responses are broadly supportive of our proposed changes to CRC14. Only EMID made any representation to the Notice.
The change proposed to CRC 14 in EMID’s response is to allow for the Authority to direct a value of the penalty interest rate (PRt) within a range of zero and three per cent. The reason for this change is to ensure that any penalty interest adjustment that EMID receive through the K factor, as a result of any directed PRt value, includes the penalty interest adjustment they would have incurred had the under recovery of the residual losses incentive (PPLt) not taken place. Excluding the impact of PPLt, EMID would have been in an over recovery position of greater than 103%, attracting a PRt value of three percent. Therefore any directed value of PRt under the new provisions of CRC 14 will need to take this into account. This means that setting a PRt value between zero and three per cent is appropriate.
We agree with EMID’s representation and have made its proposed alteration to CRC 14 in Schedule 3A (marked in yellow highlight).
We have not made EMID’s proposed change to versions of CRC 14 held by EPN, SPD or SPMW because none of these licensees were in an over recovery position attracting a PRt value of three per cent, when excluding the impact of PPLt.
The effect of the modification is to provide for the value of PRt, applied to the Licence Holder in any Regulatory Year to the over and under recoveries of revenue, to be set in a direction given by the Authority.
A copy of the decision and other documents referred to in this decision have been published below.
The modification will take effect from 24 October 2014.