In our recent decision on closing out the DPCR4 losses incentive mechanism , we indicated that we would consider applications from Distribution Network Operators (DNOs) in relation to any adverse impact or penalty as a result of the effect of the restatement of losses data or the anticipation of the residual losses incentive (PPL values) on allowed revenue under/over recovery positions. This is to prevent DNOs being unfairly penalised for the under/over recovery of revenue related to the Authority’s decisions not to activate the Distribution Losses Incentive Mechanism and the decision on closing out the DPCR4 losses incentive mechanism.
WPD, SPEN and UKPN have submitted applications to us requesting relief from the PRt value of zero for affected Regulatory Year(s). Based on the applications we are satisfied that, in relation to the losses incentive values, their decisions to under recover allowed revenue were justified. We are also satisfied that their treatment of the anticipated PPL value(s) caused the PRt value with respect to the affected Regulatory Year(s) to be zero and that without the PPL value(s) they would have incurred a different PRt value.
Therefore, in relation to the losses incentive values, we are minded-to provide WPD, SPEN and UKPN with relief from the penalty interest rate (PRt) of zero with respect to the affected Regulatory Year(s).
For UKPN and SPEN, a PRt value of 1.5 per cent is proposed to be directed with respect to the affected Regulatory Year(s). Excluding the impact of the anticipated PPL in the affected Regulatory Year(s), UKPN and SPEN would have received a PRt value of 1.5 per cent.
For WPD, a PRt value of 0.66 per cent is proposed to be directed with respect to the affected Regulatory Year. Excluding the impact of the anticipated PPL in Regulatory Year 2013/14, WPD’s East Midlands licensee (EMID) would have been in an over recovery position of greater than 103 per cent, attracting a PRt value of 3 per cent under the provisions of CRC 14. A PRt value of 0.66 per cent with respect to the affected Regulatory Year ensures that the additional allowed revenue EMID can recover is a value that:
We are seeking stakeholders’ views on our minded-to position. Responses should be sent to Tom Mackenzie, Distribution Policy or emailed to thomas.mackenzie@ofgem.gov.uk by 15 October 2014.