(3.1) Options & Issues

If no connection charge is made then the network operator will recover all these capital costs in usage charges paid by all users. GE considers this to be inappropriate as existing users would meet significant costs caused by new users from which the existing users would derive no benefit.

GE believes it is appropriate to make a charge to new users for system connection and discounts this option.

2. Shallow Reinforcement Charge for the costs of reinforcement only of the local network in the area of the new usage (typically the secondary network within a high voltage sector, see the Statement of Opportunity)

Historically GE has levied "shallow" connection charges for new customers whose incremental impact relative to the capacity of the adjacent network is minimal. For GE's purposes incremental impacts are defined as minimal when load is less than 500kW or less than 10% of the peak sector load. Over recent years requests for new load exceeding 50 kW are in the order of 100 p.a. Of these typically less than 10 are for loads in excess of 500kW, where the new load can make a significant impact on the network.

"Shallow" charging is advantageous in that the new user can readily identify the connection assets and hence there is transparency as to the value being provided to the new user. Furthermore GE can readily identify and cost the relevant assets without incurring any significant administrative overhead. This methodology provides market signals to potential users as to the economic effect of the new use on the network.

GE believes shallow charging is entirely appropriate for small new users where the new user's load is less than 500kW or less than 10% of the peak sector load.

There are, however, a limited number of potential new users whose size or location is relatively large or distant compared to the existing network sector. In such cases extensive works will be required to the network, not just in the geographic area of the new user but possibly on the wider network. If only "shallow" charging is applied in such instances then existing users would have to meet the costs of such extensive works, through the higher UoS charges, with large users subsidised by existing users, which is inequitable. GE proposes an alternative method to address these types of users, which is addressed in option 4.

3. Deep Reinforcement Charge for all the local reinforcements, for all other network reinforcements and for capacity in principal network assets

Historically, deep charging has not been employed by GE.

Deep charging recovers the full costs of all system changes from any new system user irrespective of the user's intended location and size of connection. Whilst there is an economic rationale for deep charging based on a complete allocation of all additional costs, the estimation of deep charges would require GE to carry out sophisticated mathematical analysis of its network, a task which GE is not currently able to undertake on a routine basis. Furthermore, GE believes that such deep connection charges would be a significant barrier to new developments on Guernsey, inconsistent with the States development plans.

GE believes deep charging is inappropriate for Guernsey and discounts this option.

4. Semi-deep Reinforcement Charge for local reinforcement costs and also the cost of reinforcing principal network assets further back in the network

In recent years there have been a small number of developments where the size of the new load relative to the network capacity available has been sufficiently large that a semi-deep charging regime was adopted. Over recent years less than 5% of customers have been charged on the basis of semi deep connection charging.

For such large new users, GE advocates the use of a "semi-deep" charging methodology as the appropriate trade-off between the extremes of shallow and deep charging. Given the actual costs of a new connection are driven by the power demand, the distance from the existing network and the existing local configuration, it would appear appropriate to use these factors as the basis for deciding whether any potential user should be charged "shallow" or "semi-deep" costs. A new user located a significant distance from the existing network will attract a larger connection charge irrespective of whether the shallow or semi-deep methodology is used. The critical factor, therefore, in choosing the appropriate methodology is the power demand, and its relationship to the capacity of the existing network.

The assessment that a potential new user is large enough to warrant "semi-deep" charging is now set out. Any user requiring a connection of more than 500 kW will broadly be utilising more than 10% of the local network capacity as the mean capacity of each sector within the secondary 11,000 volt network is approximately 5 MW (see the Statement of Opportunity). Furthermore a 500 kW trigger is used as the lower limit for central despatch limit Licence Condition 24 of generation licences.

In summary this criterion will be used as a trigger so that new users in excess of 500kW will be charged using a semi-deep methodology, whilst users with loads equal to or less than 500kW will have connection charges calculated on a "shallow" basis.

GE believes semi-deep charging is entirely appropriate for connections greater than 500kW.