final inputs into the PTRM and the annual building block revenue requirements that result from this modelling. Having determined the total annual building block revenue requirement for the 2017–22 regulatory control period, the annual building block revenue requirements for each regulatory year are smoothed across that period to reduce revenue variations between years and to come up with the expected MAR for each year. This is done through the determination of the X factors. The X factors must equalise (in NPV terms) the total expected revenue cap to be earned by the TNSP with the total building block revenue requirement for the 2017–22 regulatory control period. The X factor must minimise, as far as reasonably possible, the variance between the expected MAR and annual building block revenue requirement for the last regulatory year of the period. We therefore consider a divergence of up to 3 per cent between the expected MAR and annual building block revenue requirement for the last year of the regulatory control period is reasonable, if this can promote smoother price changes over the regulatory control period. The building block costs (and the elements that drive those costs) used to determine the unsmoothed annual building block revenue requirements are set out below. The building block costs The efficient costs to be recovered by a TNSP can be thought of as being made up of various building block costs. Our draft decision assesses each of the building block costs and the elements that drive these costs. The building block costs are approved reflecting trade-offs and interactions between the cost elements, service quality and across years. Table 1.3 shows the building block costs that form the annual building block revenue requirement for each year and where discussion on the elements that drive these costs can be found within this draft decision.
final inputs into the PTRM and the annual building block revenue requirements that result from this modelling. Having determined the total annual building block revenue requirement for the 2017–22 regulatory control period, the annual building block revenue requirements for each regulatory year are smoothed across that period to reduce revenue variations between years and to come up with the expected MAR for each year. This is done through the determination of the X factors. The X factors must equalise (in NPV terms) the total expected revenue cap to be earned by the TNSP with the total building block revenue requirement for the 2017–22 regulatory control period. The X factor must minimise, as far as reasonably possible, the variance between the expected MAR and annual building block revenue requirement for the last regulatory year of the period. We therefore consider a divergence of up to 3 per cent between the expected MAR and annual building block revenue requirement for the last year of the regulatory control period is reasonable, if this can promote smoother price changes over the regulatory control period. The building block costs (and the elements that drive those costs) used to determine the unsmoothed annual building block revenue requirements are set out below. The building block costs The efficient costs to be recovered by a TNSP can be thought of as being made up of various building block costs. Our draft decision assesses each of the building block costs and the elements that drive these costs. The building block costs are approved reflecting trade-offs and interactions between the cost elements, service quality and across years. Table 1.3 shows the building block costs that form the annual building block revenue requirement for each year and where discussion on the elements that drive these costs can be found within this draft decision.