1 mod review group 126 feb 07 slides 126 review group – restriction of invoice billing period the...

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Mod Review Group 126 Feb 07 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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Illustration of current arrangements

A valid invoice challenge received up to 18 months from the invoice payment due date will result in an invoice adjustment over the original charge period

1.2.98

10.1.07

Invoice issued

charge period

22.1.07

Invoice paymentduedate

July 08

Invoice queryperiodclosedout at 18 months

To illustrate the present invoicing limitations the example below shows a charge which is end-dated at the present limitation date 1st February 1998. Under UNC rules an invoice query can be submitted up to 18 months from the invoice payment due date

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For example, with effect from 1.4.08, the Close Out date moved from 1.2.98 to x. From this date new charges are end dated at x.Note: The date is shown as effective from 1.4.08, any proposed regime must allow for those charges up to 31st March 08 and any which are in the closed out period, to be invoiced on the invoices that are issued in April e.g. reconciliation invoice is issued at M+18

Factors to consider: - The timing of the setting the effective date for x to ensure that valid charges raised up to x can still be invoiced- Cutover rules

Principle of bringing the restricted invoicing period forward to apply to all invoice types and charges….

1.2.98 x

1.4.08

Period now closed out

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… Principle of bringing the restricted invoicing period forward to apply to all invoice types and charges.

x1

1.4.08

Period now closed out

x

1.4.08

x

A MPRN reconciliation charge

A MPRN reconciliation charge

Reconciliation invoice issued

Reconciliation invoice issued(must include the reconciliationcharge illustrated)

When rolling forward x to x1, the rules must allow for those charges that are to be included on a forthcoming invoice to be invoiced. The effective date of x1 is 1.4.08, but the Reconciliation Invoice must include all reconciliation charges that became due on 31.3.08 and date back to x

M+18

M+18

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On 1.4.08, when the Close Out date moved from 1.2.98 to x, charges for the period pre x became closed for adjustments.

1.2.98

10.1.07

Invoice issued

Charge period

22.1.07

Invoice Paymentduedate

July 08

Invoice queryperiodclosedout at18 months

x

1.4.08

CloseOutdatemoves forward

Example 1Full period adjustment if query adjusted before 31st March 08

Example 2Period of adjustment ifquery adjusted after 1.4.08

Not adjusted

What happens to charges on an invoice in the event of a valid query? ….

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Considerations: Should the cut-off period for queries be dictated by the query

submission date or the date at which the adjustment is processed? Note: this consideration only applies to those queries that have older charges.

… What happens to charges on an invoice (slide 2) in the event of a valid query?

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1st Feb 98

1.4.05 1.4.06 1.4.07 1.4.08R1

1.4.09R2

1.4.10R3

1.4.11R4

1.4.12R5

On 1.4.08 (R1) the close out date moves forward to 1.4.05, on 1.4.09 (R2) the close out date moves forward to 1.4.06 etcRIP 1 runs from 1.4.05 to 31st March 09 invoice durations e.g. rec and adjustments are between a maximum of 3 years and 1 day and 3 years 364 days in length.In RIP1 an adjustment or reconciliation invoiced on 31st March 2009 will go back to a maximum of 1.4.05. The following day, when RIP2 becomes “live” an adjustment or reconciliation will go back to a maximum of 1.4.06 (note rule required on slides 3 and 4)

RIP1

RIP2

RIP3

RIP4

An illustration of Restricted Invoice Periods (RIP)

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Considerations How should the first roll forward from 1.2.98 to a new date be

handled What should be the RIP What frequency should the RIP roll forward Roll-forward date Note: Ofgem consultation to 191/06 refers

to “Changing the start of the gas charging year from October to April”, this may be relevant to discussions.

An illustration of Restricted Invoice Periods (RIP) continued

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All reconciliations processed in 2006 and the year the energy related to

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

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%

% o

f I&

C T

hro

ug

hp

ut

RbD Volume % of I&C Throughput

Mod 640 Adjustment

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Reconciliations

Slide 9 shows the effect of all reconciliations processed in 2006.

To put the volumes in context, the right hand axis shows the reconciliation energy as a percentage of I&C throughput, the left hand axis is the energy value.

The annual adjustment associated with Mod 640 was processed in 2006 for the 04/05 gas year

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Unreconciled I&C supply points

% of original I&C Allocations Unreconciled

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

1998 1999 2000 2001 2002 2003 2004 2005 2006

Year % of unreconciled energy applies to

%

% Unreconciled

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Unreconciled energy

The chart in slide 11 details the energy values yet to be reconciled. The energy value is as deemed on the commodity invoice, the reconciliation may result in a change to the final energy position.

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RbD treatment and processing

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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RbD treatment and processing continued

R1 R2x2x1 x3 R3 R4

RIP1

RIP2

RIP3

At R1, RIP1 becomes effective with charges end dating at x1At R2, RIP 2 becomes effective with charges end dating at x2Scenario – In RIP1 at date R2-1day, an adjustment is invoiced which contains charges back to x1.On date R2 x1 moves to x2 and x2 becomes the end date for charges.The RbD element of the adjustment invoiced at R2-1day will not be processed until after R2 The rules need to allow this RbD processing to occur to ensure that energy remains “whole” between the market sectors

Adjustment charge period Adjustment invoice issued

RbD charges processed

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Considerations summary

Cutover rules, ease of cutover and behaviours for each cutover Setting the date for the restricted end date to be effective to allow for invoices to

be issued How should the first roll forward from 1.2.98 to a new date be handled? What duration should the RIP be? What frequency should the RIP roll forward? What rules should / can exist for queries – submission date v date adjustment

processed? Roll forward date - note: Ofgem consultation document Any regime must allow for energy to be processed via RbD in full USRVs, the incentive regime must recognise the restricted invoicing principles.

The present review of the application of the existing scheme is being considered under a Distribution Workstream topic. The 126 review group will need to consider the USRV regime in place at the time, and its appropriateness for any restricted invoicing period proposals

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Activities that can generate “aged” charges

The following activities can lead to charges that currently go back to 1st February 1998:

Primary Reconciliation charges: DM reconciliation NDM reconciliation LDZ reconciliation I&C CSEP reconciliation Adjustment charges: Invoice and operational queries Consumption adjustments

1 mod review group 126 feb 07 slides 126 review group – restriction of invoice billing period the...

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