Embedded Benefits: Consultation on CMP264 and CMP265 minded to decision and draft Impact Assessment

Publication date
1st March 2017
Closing date
18th April 2017
Policy areas

On 1 March we published our minded to decision and draft Impact Assessment of industry’s proposals (CMP264 and CMP265) to change the electricity transmission charging arrangements for Embedded Generators. On 20 June, we published our decision on this. You can access both documents below. On 22 June, we published our Impact Assessment and Decision on industry proposals (CMP264 and CMP265) to change electricity transmission charging arrangements for Embedded Generators.

Over the past year, we have highlighted concerns about the electricity transmission network charging arrangements for smaller Embedded Generators (EGs), including the exemptions and payments collectively referred to as ‘Embedded Benefits’. We have previously indicated that the ability of a supplier to use sub-100MW (‘smaller’) EG to reduce transmission use of system charges, and for smaller EG to be paid to help others avoid them, is a distortion. We indicated in July and again in December last year that one element – specifically the TNUoS Demand Residual (TDR) – was a significant cause for concern.  Industry have raised modifications CMP264 and CMP265 to address these distortions. This impact assessment covers those modification proposals and the 23 Workgroup Alternative CUSC Modification proposals (WACMs) produced during the industry self-governance workgroup process.

We have undertaken both a qualitative and quantitative assessment of the 25 proposals available to us. We considered each proposal against the CUSC objectives and our statutory duties. Our assessment took into account the responses to our July 2016 open letter, views of the CUSC Panel, the consultation responses from the workgroup process and the Final Modification report. Our quantitative assessment takes into consideration the quantitative assessment from modelling and consultancy support that we commissioned for this purpose from Lane Clark and Peacock  LLP and Frontier Economics.

Our minded to decision is to direct that WACM4 be made.  Our provisional view is that the level of TDR payment to smaller EG should be reduced to the level of avoided Grid Supply Point (GSP) costs, and introduction of the new arrangements should be phased over three years from 2018 to 2020. 

We invite stakeholders’ views on this draft impact assessment and on our minded to position. We have extended the date for responses to this consultation to 9am on 18 April 2017.

Following the consultation and our consideration of responses, we plan to publish a final decision in May of this year.

Update 7 March 2017

This document was re-issued on 7 March with minor corrections to the following typographical errors:

  • Table 24: £72.bn should read £7.2bn
  • Table 23 and accompanying appendix table on p104: clarification that our analysis provides a range for the estimate of the NPV for WACM 5 between £7.2bn and £7.4bn, as widely referenced in the document.
  • Table 29: WACM 4 has an NPV of £7.2bn not £7.4bn, as widely referenced in the document.
  • Table on CUSC Panel votes in appendix 2: omitted vote for CMP265 original added to table.

Update 15 March 2017

This document was re-issued on 15 March with the following correction:

  • Appendix 8 (page 101): The CCGT fixed cost assumption within the cost assumptions table in Appendix 8 should read £17.6/kW pa, rather than £11.0/kW pa. This error was in the table only. The correct figure of £17.6/kW pa has been used in the modelling.

Supplementary information

We have published the modelling report and associated data to supplement our CMP264/265 minded to decision and draft impact assessment and have arranged a optional workshop to discuss the report.

For more information, see: Publication of supplementary modelling report on CMP264/265 minded to decision and optional workshop to discuss report