Electricity LRAICkick-off meeting

20th February 2013

www.pwc.com/sk

Agenda

Conceptual approach

TSO network conceptual design

TSO network conceptual design

Project approach

PwC

PwC project team

Project plan

Open issues

Immediate next step

2February 2013LRAIC

Cost base

Historic cost based

• Assesses past behaviour

Forward looking

• Basis for future decisions

• Relevant cost for a new entrant

Uses

PwC

• Relatively simple

• Easy to produce

• Embeds economically inefficientallocation of resources

• Misstates real profit

• Supports economically efficientdecisions

• Establishes target costs

• Complex modelling

• Outputs sensitive to chosenmethodology

LRAIC3

január 2013

Positives

Negatives

Modelling approach

Top Down

• takes as a starting point the accounts ofan operator

• captures the actual costs of doing

Bottom up

• ‘builds’ a hypothetical network

• engineering model designed to meet agiven level of demand at a prescribed

PwC

• captures the actual costs of doingbusiness

• embeds current inefficiencies in themodel

• requires detailed understanding ofcurrent structure of accountingevidence

given level of demand at a prescribedgrade of service

• constructs an efficient network

LRAIC4

január 2013

Long Run Average Incremental Costing concept

Fully distributed costs (FDC)

• full allocation of costs that are directlyor indirectly attributable to the product

Long-run averageincremental costs (LRAIC)

• considers the incremental costsassociated with the increase of theoutput of the product by a discrete

PwC

or indirectly attributable to the productor service

• allocates direct variable costs, directfixed costs, share of joint costs andshare of common costs to the service orproduct

output of the product by a discreteincrement

• when the increase is represented by asubstantial, then both direct variablecosts and direct fixed costs will changewith the increase of the output of theproduct or service

LRAIC5

január 2013

Conceptual approach

• Modeling andcosting

Technical-technological model

• TSO model• DSO model

PwC 6január 2013LRAIC

costingapproaches

• WACC• Depreciation

Methodologicalguidelines

• TSO model• DSO model

• DSO model• Interim and

Finalcalculation

LRAIC economicalmodel

TSO network

PwC 7január 2013LRAIC

Source: http://www.geni.org/globalenergy/library/national_energy_grid/lithuania/lithuaniannationalelectricitygrid.shtml

TSO network conceptual network design

330kV

Losses

International connections

Producers

Losses

Customers

PwC 8január 2013LRAIC

110kV

HV/HVtransformation

Losses

Own consumption

Losses

Customers

Producers

DSO network conceptual network design

HV330kV/110kV

35kV, 20kV, 16kV,10kV, 6kV

HV/MVtransformation

Losses

Own consumption

delivery points

Producers

PwC 9január 2013LRAIC

LV

MV

MV/LV transformation

0.4kV

Losses

Customers

Losses

Own consumption

Losses

Customers

smallproducers

Project approach

Best practice and well-provenmethodologies in designing costingmodels and methodologies

Technical knowledge of electricitytransmission and distribution networks

Detailed knowledge of the localelectricity transmission anddistribution market

Relationship with the local market

Joint effort to fulfillproject’s goals and

timeline

PwC 10január 2013LRAIC

transmission and distribution networksin

Experts from the area of energy sectorregulation

Extensive project managementexperience from similar projects

Knowledge of both the local market andEU energy market

Relationship with the local marketparticipants

Relevant comments on themethodologies, cost models and finalcost estimation

Transfer of knowledgeto NCC’s personnel

Strong projectmanagement and

project governance

PwC project team

Project leadership:

Audrius Cesiulis/Ivo Dolezal

ElectricityLRAIC experts:

PwC 11január 2013LRAIC

Electricityengineers:

Jaroslav Sabata,Rudolf Milota

LRAIC experts:Ondrej Seban,

Martina Habanova

Project team:Rapolas Striukas and otherLithuanian consultants as required

High level project plan

PwC 12január 2013LRAIC

High level project plan

PwC 13január 2013LRAIC

Thank you for your attention!

Cieľom tejto publikácie je priniesť čitateľovi iba všeobecné informácie a pomôcť mu získať základný obraz o veciach, o ktoré sa zaujíma, a nie poskytnúť mu profesionálne poradenstvo. Nikto by sa preto nemal riadiť výlučne informáciami, ktoré sú v nej obsiahnuté, ale mal by sa zakaždým opierať o špecifické odborné rady. Nevydávame nijaké prehlásenie resp. záruku (či už explicitnú alebo implicitnú), pokiaľ ide o presnosť či úplnosť informácií uvedených v tejto publikácii, a v rozsahu, v akom to zákon povoľuje, firma PricewaterhouseCoopers Slovensko, s.r.o. a ani jej spoločníci, zamestnanci a zástupcovia neprijímajú ani nepreberajú na seba nijakú povinnosť, zodpovednosť či povinnú starostlivosť za akékoľvek následky voči komukoľvek, kto by konal alebo nekonal podľa informácií uvedených v tejto publikácii ani za akékoľvek rozhodnutia prijaté na jej základe.

© 2011 PricewaterhouseCoopers Slovensko. Všetky práva vyhradené. Názov "PwC” v tomtodokumente označuje spoločnosť PricewaterhouseCoopers Slovensko, s.r.o., ktorá je členom siete firiem PricewaterhouseCoopers International Limited, z ktorých každá je samostatným anezávislým právnym subjektom.