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126 Review Group – Restriction of Invoice Billing Period

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.

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126 Review Group – Restriction of Invoice Billing Period

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  1. 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 Mod Review Group 126 Mar 2007 slides

  2. 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 Mod Review Group 126 Mar 2007 slides

  3. 5 year model (4yrs to 4yrs 364 days) First implementation in April 2008 With 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. 1st Feb 98 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3 Mod Review Group 126 Mar 2007 slides

  4. 4 year model (3yrs to 3yrs 364 days) First implementation in April 2008 With 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 2005 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 1st Feb 98 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3 Mod Review Group 126 Mar 2007 slides

  5. 3 year model (2yrs to 2yrs 364 days) First implementation in April 2008 With 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 2006 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 1st Feb 98 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3 Mod Review Group 126 Mar 2007 slides

  6. Business Rules The following business rules are illustrated using the 5 year model, the principles apply regardless of period used. Mod Review Group 126 Mar 2007 slides

  7. Impact of moving the earliest start date forward, illustration using 5 year model Up to 31st March 2008, charges (where required) will calculate back to 1st Feb 1998 1.2.98 1.4.08 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 Charge duration Period now closed Out – not reconciled or adjusted Mod Review Group 126 Mar 2007 slides

  8. Impact of moving the earliest start date forward, illustration using 5 year model - reconciliations Up to 31st March 2008, charges (where required) will calculate back to 1st Feb 1998 1.2.98 1.4.08 R1 R2 Reconciliation charge duration With effect from 1st April, charges (where required) will be calculated back to 1st April 2004 The period pre 1.2.98 is unreconciled on current business rules 1.2.98 1.4.2004 1.4.08 R1 R2 Reconciliation charge duration Period now closed out – not reconciled Mod Review Group 126 Mar 2007 slides

  9. Illustration of reconciliation Meter reading period Actual consumption 1.4.2004 DIFFERENCE Estimated consumption R1 R2 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. Mod Review Group 126 Mar 2007 slides

  10. 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 Mod Review Group 126 Mar 2007 slides

  11. 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 valid The new restricted invoicing period will roll forward on 1st April each year, and applies to charges to be calculated from 1st April each year. 1.2.98 1.4.08 24th April R1 R2 Reconciliation invoice issued A MPRN reconciliation charge Mod Review Group 126 Mar 2007 slides

  12. Applying the effective date, illustration using 5 year model continued Reconciliations processed on the May 2008 invoice will end date at 1.4.2004. 1.2.98 1.4.2004 1.4.08 24th April 28th May Period now closed Out – not reconciled or adjusted Reconciliation invoice issued A MPRN reconciliation charge Mod Review Group 126 Mar 2007 slides

  13. 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. Mod Review Group 126 Mar 2007 slides

  14. Business Rule – operational query adjustments continued, examples…. Financial adjustment invoiced Query submitted 1.2.98 1.4.2004 1.4.08 1.4.09 Period now closed out – not adjusted Maximum adjustment period (using 5 year model) Mod Review Group 126 Mar 2007 slides

  15. Business Rule – operational query adjustment examples continued Financial adjustment invoiced Query submitted RIP 1.4.2004 – 31.3.2009 1.2.98 1.4.2004 1.4.08 1.4.09 Period now closed out – not adjusted Maximum adjustment period RIP 1.4.2005 – 31.3.2010 Financial adjustment invoiced Query submitted 1.2.98 1.4.2004 1.4.2005 1.4.08 1.4.09 Maximum adjustment period Period now closed out – not adjusted (using 5 year model) Mod Review Group 126 Mar 2007 slides

  16. 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 Mod Review Group 126 Mar 2007 slides

  17. Business Rule RbD treatment continued 1.4.04 1.4.05 1.4.06 1.4.07 1.4.08 1.4.09 1.4.10 RIP1 Adjustment charge period Adjustment invoice issued RIP2 Period now closed out – not reconciled or adjusted RbD charges processed 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”. Mod Review Group 126 Mar 2007 slides

  18. 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. Mod Review Group 126 Mar 2007 slides

  19. Business Rule USRVs… In February 2008, a reconciliation charge is calculated which results in a USRV 1.2.98 1.4.2004 1.4.08 1.4.09 Reconciliation charge period (USRV) R2 R1 Period now closed out – not reconciled In April 2009, part of the reconciliation charge is now “timed out”. 1.2.98 1.4.2004 1.4.2005 1.4.08 1.4.09 Reconciliation charge period (USRV) R2 R1 Period now closed out – not reconciled Mod Review Group 126 Mar 2007 slides

  20. Business Rule USRVs continued, recommended treatment In February 2008, a reconciliation charge is calculated which results in a USRV 1.2.98 1.4.2004 1.4.08 1.4.09 Reconciliation charge period (USRV) Period now closed out – not reconciled 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 1.4.2005 1.4.08 1.4.09 Revised reconciliation charge period Period now closed out – not reconciled Mod Review Group 126 Mar 2007 slides

  21. 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. Mod Review Group 126 Mar 2007 slides

  22. 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 Mod Review Group 126 Mar 2007 slides

  23. Reconciliation values processed in 2006 Mod Review Group 126 Mar 2007 slides

  24. Reconciliation values processed in 2005 Mod Review Group 126 Mar 2007 slides

  25. Reconciliation values processed in 2004 Mod Review Group 126 Mar 2007 slides

  26. Reconciliation values processed in 2003 Mod Review Group 126 Mar 2007 slides

  27. 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. Mod Review Group 126 Mar 2007 slides

  28. Unreconciled Energy by Calendar Year 35.0 24.00% 30.0 20.00% 25.0 16.00% 20.0 % of Original Allocations Energy (Twhs) Unreconciled 12.00% 15.0 8.00% 10.0 4.00% 5.0 0.0 0.00% 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year of Unreconciled Volumes UnRead Suppressed % Unreconciled Unreconciled I&C energy Mod Review Group 126 Mar 2007 slides

  29. 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 Mod Review Group 126 Mar 2007 slides

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