126 Review Group – Restriction of Invoice Billing Period

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Mod Review Group 126 Mar 2007 slides

126 Review Group – Restriction of Invoice Billing Period

The review proposal is primarily concerned with restricting the invoicing period in equitable manner on an enduring basis.

The following slides describe the factors to be considered in implementing and maintaining a rolling restricted invoicing period.

The dates and durations used are for the purpose of explaining the factors to be considered, the review group will be responsible for recommending business rules

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Business Rules

Business rules are required for: Setting the effective start and end date for each restricted invoicing

period (RIP), the timing and frequency of the roll-forward cut-off date Cutover principles Operational queries and adjustments Reconciliation by Difference charging USRVs

In addition, the review group should be mindful of: Other UNC activities and timescales e.g. must reads Current RbD discussions USRV discussions at the Distribution Workstream

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5 year model (4yrs to 4yrs 364 days)

1st Feb 98

1.4.04 1.4.05 1.4.06 1.4.07 1.4.08R1

1.4.09R2

1.4.10R3

1.4.11R4

RIP1

RIP2

RIP3

First implementation in April 2008With effect from 1.4.08 all charges raised from this date and up to 31st March 2009 are restricted to an earliest start date of 1st April 2004

In April 2009, the restricted invoicing period will roll-forward one year. With effect from 1.4.09, all charges raised from this date and up to 31st March 2010 will be restricted to an earliest start date of 1st April 2005.

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1st Feb 98

1.4.04 1.4.05 1.4.06 1.4.07 1.4.08R1

1.4.09R2

1.4.10R3

1.4.11R4

RIP1

RIP2

RIP3


In April 2009, the restricted invoicing period will roll-forward one year. With effect from 1.4.09, all charges raised from this date and up to 31st March 2010 will be restricted to an earliest start of 1st April 2006

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1st Feb 98


In April 2009, the restricted invoicing period will roll-forward one year. With effect from 1.4.09, all charges raised from this date and up to 31st March 2010 will be restricted to an earliest start date of 1st April 2007

1.4.04 1.4.05 1.4.06 1.4.07 1.4.08R1

1.4.09R2

1.4.10R3

1.4.11R4

RIP1

RIP2

RIP3

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Business Rules

The following business rules are illustrated using the 5 year model, the principles apply regardless of period used.

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Impact of moving the earliest start date forward, illustration using 5 year model

1.2.981.4.08

Charge duration

With effect from 1st April 2008, charges (where required) will be calculated back to 1st April 2004

1.2.98 1.4.2004 1.4.08

Period now closed Out – not reconciled or adjusted

Charge duration

Up to 31st March 2008, charges (where required) will calculate back to 1st Feb 1998

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Impact of moving the earliest start date forward, illustration using 5 year model - reconciliations

1.2.981.4.08

Reconciliation charge duration

With effect from 1st April, charges (where required) will be calculated back to 1st April 2004

1.2.98 1.4.2004 1.4.08

Period now closed out – not reconciled

Reconciliation charge duration

Up to 31st March 2008, charges (where required) will calculate back to 1st Feb 1998

R1

R1

R2

R2

The period pre 1.2.98 is unreconciled on current business rules

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Illustration of reconciliation

Estimatedconsumption

Actualconsumption

Meter reading period

R1 R2

DIFFERENCE

D1 D2 D3 D4 Dn

The reconciliation charges are calculated on a daily basis. To implement the rule in slides 8 and 9 xoserve systems will truncate the reconciliation at 1.4.2004. Reconciliation volumes for D1, D2 and D3 will not be invoiced and will remain unreconciled.

1.4.2004

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Business Rule – applying the effective date

The implementation date for each period will be known in advance i.e. 1st April each year.

Relevant invoice charges e.g. reconciliation charges, will be calculated to 31st March, and processed on an invoice issued in April.

The business rule must allow these charges relating to March, but calculated in April to be valid under the restricted invoice period regime

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1.2.98

1.4.08

Reconciliation invoice issued

24th April

A MPRN reconciliation charge

Applying the effective date, illustration using 5 year model continued

Specifically for the month immediately prior to the RIP roll-forward, charges (where required) will be calculated back to the current earliest start date (in the example below 1st February 1998) and up to the end date (in the example below sometime in March 2008). This charge will appear on the Reconciliation invoice to be issued on 24th April.On 1st April the end date rolls-forward to 1st April 2004.The regime must recognise the charges on the March 2008 Reconciliation invoice to be validThe new restricted invoicing period will roll forward on 1st April each year, and applies to charges to be calculated from 1st April each year.

R1 R2

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Applying the effective date, illustration using 5 year model continued

24th April

1.2.98 1.4.2004 1.4.08

Period now closed Out – not reconciled or adjusted

A MPRN reconciliation charge Reconciliation invoice issued

28th May

Reconciliations processed on the May 2008 invoice will end date at 1.4.2004.

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Business Rule – operational query adjustments…

Working on the principle of a hard cutover, the maximum adjustment period for operational query adjustments will be set as the earliest start date which applies when they are invoiced.

Operational queries are generally raised when the issue surfaces and therefore not all adjustments go back to the relevant earliest start date.

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Business Rule – operational query adjustments continued, examples….

1.2.98 1.4.2004 1.4.08

Query submitted

1.4.09

Maximum adjustment period

(using 5 year model)

Financial adjustment invoiced

Period now closed out – not adjusted

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Business Rule – operational query adjustment examples continued

1.2.98 1.4.2004 1.4.08

Query submitted

1.4.09


1.2.98 1.4.2004 1.4.08

Query submitted

1.4.09


1.4.2005

(using 5 year model)

RIP 1.4.2004 – 31.3.2009

RIP 1.4.2005 – 31.3.2010





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Business Rule RbD treatment ….

Reconciliations and adjustments are processed as a “primary” activity.

Each reconciliation and adjustment will generate a “secondary” activity - an equal and opposite energy adjustment to the smaller supply point market through the Reconciliation by Difference (RbD) process.

Not all RbD processes are completed at the same time as the “primary” activity. Some reconciliations and adjustments are processed a month later in RbD than the “primary” reconciliation or adjustment

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Business Rule RbD treatment continued

1.4.04

RIP1

RIP2

Adjustment charge period Adjustment invoice issued

1.4.05 1.4.06 1.4.07 1.4.08 1.4.09 1.4.10

Period now closed out – not reconciled or adjusted

The RbD charges associated with the adjustment processed in March 2009 are processed on the reconciliation invoice issued in April 2009.The business rules must allow the RbD charges to flow in full, including those relating to the period 1st April 2004 to 1st April 2005, which is now “closed-out”.

RbD charges processed

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Business Rule USRVs…

Reconciliation charges that exceed certain tolerances are suppressed and submitted to shippers for resolution.

A reconciliation charge can extend back to the earliest start date.

A business rule is required, with a supporting incentive scheme, to deal with periods in the USRVs that become “timed-out” as the RIP rolls forward.

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Business Rule USRVs…

1.2.98 1.4.2004 1.4.08 1.4.09 1.4.2005

In April 2009, part of the reconciliation charge is now “timed out”.

1.2.98 1.4.2004 1.4.08 1.4.09

Reconciliation charge period(USRV)

In February 2008, a reconciliation charge is calculated which results in a USRV




R1

R1

R2

R2

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Business Rule USRVs continued, recommended treatment

1.2.98 1.4.2004 1.4.08 1.4.09

Revised reconciliation charge period

1.4.2005

In April 2009, part of the reconciliation charge is now “timed out”. The reconciliation charge is re-calculated (this may or may not pass USRV tolerances)

1.2.98 1.4.2004 1.4.08


1.4.09


In February 2008, a reconciliation charge is calculated which results in a USRV


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Business Rule USRVs continued, recommended treatment

Other options for treatment exist such as releasing the USRV immediately prior to the 1st April roll-forward, or holding the full USRV for how ever long it takes to be resolved. Neither of these options were considered to meet the terms of reference of the review group.

An appropriate USRV incentive scheme should be developed to ensure correct industry behaviour. Note: the present incentive regime is not considered appropriate.

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Reconciliation volumes

The following 4 slides show the reconciliations processed in each year (2006,2005,2004,2003) and the year the reconciled energy relates to

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Reconciliation values processed in 2006

Total RbD volumes based on issued Reconciliation invoices for 2006 billing months

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1998 1999 2000 2001 2002 2003 2004 2005 2006

Year Reconciliation applied to

En

erg

y (T

wh

s)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

% o

f I&

C T

hro

ug

hp

ut

RbD Volume % of I&C Throughput

Mod 640 Adjustment

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0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1998 1999 2000 2001 2002 2003 2004 2005 2006


En

erg

y (

Tw

hs

)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

% o

f I&

C T

hro

ug

hp

ut


Mod 640 Adjustment

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0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1998 1999 2000 2001 2002 2003 2004 2005 2006


En

erg

y (T

wh

s)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

% o

f I&

C T

hro

ug

hp

ut


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0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1998 1999 2000 2001 2002 2003 2004 2005 2006


En

erg

y (T

wh

s)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

% o

f I&

C T

hro

ug

hp

ut


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Unreconciled energy

The following slide shows the amount of deemed energy by year that is yet to be subject to a reconciliation. The deemed energy is split into energy reconciled but held in suppression and energy not yet reconciled.

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Unreconciled I&C energy

Unreconciled Energy by Calendar Year

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1998 1999 2000 2001 2002 2003 2004 2005 2006

Year of Unreconciled Volumes

En

erg

y (

Tw

hs

)

0.00%

4.00%

8.00%

12.00%

16.00%

20.00%

24.00%

% o

f O

rig

ina

l A

llo

ca

tio

ns

U

nre

co

nc

ile

d

UnRead Suppressed % Unreconciled

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Pre first cutover considerations

Based upon a first cutover date of [1st April 2008], bringing the earliest start date to [1st April 2004], the industry may wish to work towards: Resolution of any aged operational queries Resolution of USRVs Reconciliation of unread meters

Documents

126 Review Group – Restriction of Invoice Billing Period