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Part Funded Reinforcement trial

Background

There have been long term efforts by Ofgem, DNOs, ICPs / IDNOs to seek mechanisms to extend contestability to Part Funded Reinforcements (PFR).  Primarily as a result of concerns with procurement and the handling of DNO indirect costs, no significant trial has yet taken place that would form a basis for a business as usual approach.

WPD re-examined these concerns and were able to propose an approach which appears to satisfactorily address the above concerns, and presented these in a workshop with ICPs and IDNOs, held on 30th July 2014.  In the light of the positive response received, WPD circulated copies of the detailed proposals (copies available on request*)  including the handling of indirect costs to all ICPs and IDNOs for comment, and later made and shared the same presentation to the Connections Managers of other DNOs.

In the light of feedback received, WPD consulted on the proposed arrangements for a trial and a draft connection offer letter. These included provision for PFR work to be undertaken by an ICP as part of a trial, the details of which are more fully described below. Following the ending of the consultation on 11th April 2015, the arrangements for the trial and connection offer letter that will apply are set out below.

Details of trial

Under the proposed trial:

  • WPD still determine the need for reinforcement and the sizing;
  • It is open to an ICP who is the customer, or who has been appointed in writing by the end customer to undertake a specific contestable scheme. It is not open to an ICP who only wishes to pursue the PFR element;
  • The ICP must have entered into the WPD Framework Network Access and Adoption Agreement, confirming their independent accreditation and competency for the type of work contained in the PFR, and it is clear that it is the customer who engages the ICP to carry out the PFR work;
  • The PFR trial will not contain elements of other trials (i.e. no "trials within trials") and consequently HV switching on WPD network and the making of final energising HV/EHV joints for example, are excluded:
  • The aggregate value of PFR work for all schemes agreed across all WPD licences is capped at a maximum of £3.5 M (sum of customer and DUOS elements). No individual scheme having a total PFR cost in excess of £ 500,000 is included:
  • The trial is open to PFR schemes which have been accepted in writing up to 31 March 2016:
  • Under normal circumstances, WPD's connection offer letter will include two options; one for WPD to undertake all the contestable work on a new connection, and one whereby WPD only undertakes the non-contestable elements. Where, in the course of discussion with WPD prior to WPD making a connection offer, a need for PFR is identified and the ICP wishes to consider undertaking this and is competent to do so, the customer may request that WPD include within their connection offer letter, a costing for a third option, whereby the ICP undertakes the PFR;
  • Under "Option 3" , where the ICP would undertake the PFR, the connection offer will set out the maximum that WPD will contribute to the cost of the PFR. That value is derived following normal cost apportionment rules and follows the arrangements for sharing of costs of indirects set out in the previously circulated detailed documents**. The connection customer contracts with and pays the ICP directly. ( The DUOS Customer base will consequently not fund any more than it would have done if WPD had undertaken the PFR);
  • In order to enable the trial to proceed without the need for long duration changes to IT systems and training of staff across the company, requests for such "Option 3" offers will be internally directed by WPD to be handled centrally. As a consequence, a maximum flow rate of PFR trial schemes is needed and, following the above consultation, is to be 5 per month. The offer letter will still come from the WPD Planner as previously, and WPD have voluntarily set the same timescales for response. 

Report at end of trial 

Following the above consultation, the following aspects are considered as measures for success of the trial:

  • There is uptake from several ICPs;
  • That ICPs support the view that the arrangements provide a workable solution that can be adopted as business as usual;
  • There are no additional impacts on Customer Interruptions (CI's) or Customer Minutes Lost ( CML’s);
  • Costs to the DUOS customer base are no higher than they would have been had WPD undertaken the PFR;
  • No issues are identified relating to competition legislation that adversely impact on the proposed arrangements;
  • No issues are identified relating to VAT that adversely impact on the proposed arrangements.

Please click here for the connection offer letter for PFR.

It is not believed that  the current WPD Framework Network Access and Adoption Agreement is impacted by the proposed PFR trial, but, if required for cross reference, a copy can be found here.

The proposed methodology for handling of indirect costs was subject to prior consultation and is not included again here.

Consultation questions

  1. Are there any specific comments on the proposed arrangements for PFR contained in the above draft Connection Offer letter?
  2. Are there any issues identified concerning VAT? (It is assumed that in a PFR situation all of the parties will be VAT Registered) 
  3. Do you have any comments on the proposed £500,000 cap on PFR scheme size within the trial, noting that it has been set so that multiple  schemes can participate?
  4. Do you have any comments on the proposed "success criteria" ?
  5. Do you have any other comments?

Consultation deadline and address

Please comment by Friday 10th April.

Please e-mail your response to Richard Allcock of WPD at rallcock@westernpower.co.uk.