Review of GB-Wide Transmission Pricing: A Report for ScottishPower UK Division

26 July 2004
By Graham Shuttleworth and Sean Gammons

On behalf of ScottishPower UK Division, NERA Directors Graham Shuttleworth and Sean Gammons appraised the transmission charging methodology (TCM) proposed by National Grid Company (NGC) for implementation under the new British Electricity Trading and Transmission Arrangements. Their report concludes that NGC's model tends to overstate the "locational" element of its charges (relative to the flat-rate charges needed to recover NGC's total revenue allowance), with the result that transmission charges in the north of Great Britain are higher than would be efficient. The report also concludes that the subjective nature of the assumptions and methods used by NGC are a source of potential instability, particularly in locations distant from the load centre, where variations in these subjective assumptions have a disproportionate impact on the level of charges. Based on these findings, the authors propose an alternative TCM designed to remedy the flaws in NGC's proposed approach.