Allocation of Smart Meter Communication Licence costs within LDNO Tariffs

Schedule 29 – New paragraphs added

DCP 395 has been raised by the Electricity Network Company and seeks to change the allocation of the Smart Meter Communication Licence Fee to allow LDNOs to recover all of the Smart Meter Communication Licence Fee as they are incurred by the Distribution System providing the last mile of the network.

Currently, Smart Meter Communication Licence Fees are calculated and charged to Distributors on a £ per MPAN basis in accordance with Section K of the Smart Energy Code (SEC). The recovery of DCC Charges is not presently allocated by either the CDCM or the PCDM as a separate, specific cost item. In the CDCM the revenue to be recovered in respect of such charges is included as part of the target revenue to be recovered by the CDCM. Therefore, DNOs recover the total costs associated with DCC Charges in respect of customers connected directly to their network.

The same is not true for determining the charges to be applied to LDNOs. In the PCDM, DCC Charges are not identified as a separate Opex cost item and are, therefore, not considered in the calculation of the Opex cost driver. This means that in calculating charges to downstream LDNOs, only a proportion of the revenue required to cover the DCC Charges is allocated – even though the DNO avoids it entirely. This discount factor calculated by the PCDM should enable the downstream LDNO to recover the costs associated with DCC Charges in full.

Add the costs of the Smart Meter Communication Licence Fee into the calculation of the allocation driver applied to operating costs within Schedule 29. The total cost would be directly allocated to the LV service network tier (adopting the same approach as the Ofgem Licence Fee). The inclusion of the Smart Meter Communication Licence Fees would be in additional to the costs already considered in the determination of the cost driver. These fees will be converted from nominal prices to 2007/08 prices in line with the rest of the costs within the PCDM.