STEM help / Calculation framework

10.3.2.3 Financial implications for resources

A Churn Cost is specified for a Resource in the Calibration Period, which is then scaled in other years according to the normalised global and Resource Churn Cost Trends, together with the Churn Age Factor.

Each Service using a Resource contributes to the Churn Cost for the Resource, in proportion to its Churn Proportion and the capacity used by that Service. The total Churn Cost for the Resource is the sum of these contributions from all Services (and Transformations – see below) using the Resource.

Churn Mode

Controls the way in which an individual Resource is affected by churn:

Normal: the only effect of churn is to generate a Churn Cost in proportion to the Churn Proportion of Services using the Resource.

The Churn Cost in year n, CCn, is calculated as:

where

UCCn = unit Churn Cost in year n

c = capacity of the Resource

ui,n = capacity used by Service i in year n

mi,n = Churn Proportion of Service i in year n.

Inflate Operations Cost: provides an alternative way to model the impact of churn without setting a specific Churn Cost. In this case the Operations Cost is inflated by the Churn Proportion of Services using the Resource.

Thus the Operations Cost in year n, OCn, is calculated as:

where

UOCn = unit Operations Cost in year n

c = capacity of the Resource

ui,n = capacity used by Service i in year n

mi,n = Churn Proportion of Service i in year n.

Inflate Demand: means that demand for the Resource is increased by the Churn Proportion, minus 1, without changing the actual Service demand. This option can be combined with a Resource Churn Cost to model the cost of churn as in the Normal mode.

The rationale for this option is that some Resources may not be directly reusable when customers disconnect and reconnect, perhaps for geographical reasons, and consequently need to be replaced. The previous Resources are not immediately available to meet increasing Service demand.

 

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