PN UNC Workgroup (AQ topic)

PN UNC Workgroup (AQ topic) 21st /22nd June 2011

Objectives of the Workgroups • Determine detailed business requirements for future determination of the Meter Point AQ • Consider/review comments made during the Project Nexus consultation and the high level principles agreed at the Principle Workgroup. • Review existing Modifications relevant to the topic area • Workgroup deliverables; • Process maps • Business Requirements Document. Document to provide sufficient definition around business rules to: • Enable the proposed requirements to be incorporated in xoserve’s investment decisions, and • Support the raising of any UNC Modification Proposals • Monitor & align with latest SMIP position • Focus will be on requirements for Project Nexus delivery

Approach & Workplan • Review; • High level AQ principles • Mod 0209; Rolling AQ • Mod 0380; Periodic AQ Calculation • Mod 0379; Provision of an AQ review audit • Mod 0378; Greater transparency over AQ Appeal performance • Mod 0292; Change AQ Amendment Tolerance for SSP • Agree scope • Consider requirements from Settlement Workgroup & impacts on the AQ • Agree future requirements • Develop process maps and detailed business rules

Scope of AQ Determination • Determination of the AQ, SOQ, SHQ & BSSOQ for • all directly connected sites (NDM & DM). Submit Meter Reading to GT Timing & Calculation of AQ Notification of AQ Challenges to the AQ Calculate SOQ/SHQ Calculate BSSOQ

Project Nexus Consultation Responses • Summary taken from the Initial Requirements Register • Introduction of a rolling AQ is a core service required to ensure energy is accurately allocated • Rolling AQ will reduce the risk to RbD shippers and costs associated with reconciliation • Increased energy consumption data should feed into an updated AQ rather than waiting for the annual review • Rolling AQ being developed by Mod 0209 workgroup & should featurein Project Nexus • Review of the SOQ for DM & NDM sites throughout the year as currently it can be upto 12 months out of date

Issues identified during the AQ Principle Workgroup during March – April 2010 Agreed issues; Changes in consumption are not immediately reflected in the AQ Current AQ is based on historic consumption data, does not accurately reflect current consumption Unable to appeal SSP AQ’s Manually labour intensive during the summer Approx. 3.5 months to validate AQ’s on portfolio Impacts on other processes during the processing & updating the annual AQ review Current process does not provide an incentive to submit reads more frequently Issues raised during Principle Workgroup

High Level Principles Agreed • At the Principle Workgroup (April 2010) the following high level principles were agreed; • Preference for a ‘No AQ’ regime. Only possible where daily allocations are performed based on actual reads • However, AQ will continue to be required for GTs, industry processes, Licence obligations & various UNC processes • Transitional arrangements in a ‘no AQ’ regime would use a ‘rolling AQ’ principle. • ‘Rolling AQ’ was the preferred option where allocations were not performed daily using actual reads • Fallback position was an improved ‘Annual AQ Review’

Current AQ Process

AQ Stats from 2010 • 19,050,615 Meter Points calculated an AQ for October 2010 review • 197,550 meter points carried forward AQ • 3,916,118 not calculated • Increase of 354,341 from 2009 • Manually validated 37,229 AQ calculations • Received 2,330,260 AQ Amendments (96% accepted) • Challenge to AQ during review period between 1st June – 13th August • Received 32,122 AQ Appeals in 2010 (83% accepted) • Challenge to AQ any time between 15th September and 31st July

Mod 209 Principles • Following taken from Modification Report, AQ Validation Rules & Business Rules (v1.0) • Meter Reads • Accepted Valid Meter Reads will be used to calculate an AQ • Estimated Meter Readings will not be used • Monthly Process • Where a Valid Meter Reading is loaded by the 10th business day of the month (Close-Out Day) the MPRN will be included in the Monthly AQ Review • Notification to the Shipper of the revised AQ (Notified AQ) 5 business days prior to the end of the month (Notification Day) • The AQ (Notified AQ) will be effective from the 1st day of the following month

Mod 0209 Principles cont. • Validation • Systematised validations carried out to ensure the calculated AQ is correct prior to being issued to the Registered User • There are two general categories for validation failures; • Data missing or inconsistent • Calculated AQ out of tolerance • Where validations fail notification issued to the Shipper & the current AQ will apply. For the following month (month +2); • If the calculated AQ is an increase on the current the calculated AQ will apply unless the User confirms that it is incorrect. Where no confirmation received the Notified AQ will apply on the 3rd month. • If the calculated AQ is a decrease on the current the calculated AQ will only apply if the User confirms it is correct.

Mod 0209 Principles cont. • Appeals process • Users can submit a new meter reading or a replacement meter reading (correction of asset data may also be required) • Where there is a manifest change in consumption the User submits an estimate of the AQ & supporting evidence of consumption • For valid/accepted appeals the AQ & EUC, where applicable, will be included in the following months review • Supply Point Offtake Quantities (SOQs) • When an AQ for an NDM is revised the SOQ will also be revised • When the AQ is revised the SOQ will use the applicable Load Factor

Mod 0209 Principles cont. • Annual Parameter Changes • The WARs will be updated on 1st October each year • AQs & SOQs will reflect any Supply Meter Point cross-over in WAR bands at the first AQ Effective Day following the update in WAR • Following a revision to the Seasonal Normal Composite Weather Variables, the AQ & SOQ will be revised at the first AQ Effective Day following the update in Weighted Average Annual Load Profile

Mod 0209 Timeline

Mod 0380 Principles • Raised in May 2011 by National Grid on behalf of all DN’s • Aims to replace Mod 0209 as raised under redundant Mod rules • Proposal • To replace the annual generation, review & update of the final AQ by a periodic (monthly) rolling AQ regime • Provide a static SOQ for 12 months rather than re-calculate each time the AQ is calculated • Similar to that developed by the 0209 Workgroup • Largely automated process • Mod proposes a review of the business & validation rules developed for 0209 in light of recent industry developments

Modification 0379 & 0379A Principles • 0379: • Place obligations on Networks to audit Shippers use of the AQ Review process • Audit would assess compliance to UNC rules • Around the AQ Appeal process for NDM’s • Proposal to implement 1st Nov 2011 • 0379A: • Performance target on Shippers to achieve at least 85% of their portfolio have updated AQ’s • Where not achieved the DN’s would instruct an audit with the aim of improving performance for the next AQ review • Where the performance achieved is below 85% the following year “Supplier Charges” are levied • Proposal to implement the 85% target to the 2011 review)

Modification 0378 Principles • Increase the amount of data provided to the industry following the AQ review • No anonymity in the reports • Aswell as existing Mod81 reports 3 new reports introduced showing; • Aggregate affect of AQ movement in kWh by Shipper • Number of increases & decreases in AQ by Shipper, split by kWh movement bands • AQ Appeals activity: numbers submitted, aggregate AQ movement for the previous gas year by Shipper • Proposal to implement November 2011

Modification 0292: Principles • Ofgem directed in April that the proposal to be implemented, date to be confirmed • SSP AQ Amendment tolerance to be reduced from 20% to 5% (+ or -) • In order to manage volume of amendments notification issued to each Shipper providing the industry & individual volume cap. • Prior to & daily during the Review • Cap based on Shipper portfolio as at 1st April

Output from other Project Nexus Workgroups • AQ used in Settlement for the following processes; • allocation purposes • derive estimates for missing reads • validate the read • determine validation tolerances

Summary of the 4 Processes being developed in the Settlement Workgroup

Questions/Issues • Will Shippers continue to calculate SOQ & SHQ? • Processes 1, 2 & 3 where daily reads are submitted? • Ratchets continue to apply where Shippers nominate the SOQ? • Would the ‘Rolling AQ’ principle only apply to sites where a periodic read is received? • How would AQ be derived for process 3 sites (daily reads received in batches)? • Is a different process required for sites where daily reads are received? • Any new AQ review processes & validations should be appropriate for smart & dumb sites • All processes should be systematised

Strawman for a Rolling AQ process in the new Regime - Assumptions • Assumptions: • Remotely read meters will provide a more robust read and more frequently • Proposed read validations will ensure any significantly erroneous reads are rejected and so not used for AQ calculations • Where possible (timing issue) only the latest/replaced read should be used for AQ calculations • SOQs revised annually to reflect User commitment • Same rules will apply for dumb metered sites • Ratchet regime remains as an incentive where Shippers nominate the site SOQ • No retrospective adjustments due to incorrect AQ; reconciliation process will adjust energy

Strawman for a Rolling AQ process in the new Regime • AQ calculated following receipt of a valid read, estimates not used for AQ calculations • Monthly process; MPRN included in the monthly AQ review where a valid read is received by 10th business day of the month. • Validation carried out on the revised AQ & where rejected the current AQ will apply until a new read is loaded (or flag set??) • Notification of the revised AQ issued to Shipper 5 Business day before month end • If more than 1 read loaded during the period, the last read loaded before the 10th business day will be used for the AQ calculation • AQ effective 1st day of the following month • For daily read & submitted sites; AQ calculated monthly (last 365 reads) • No appeal/amendments process • Shipper can update incorrect standing data & re-submit a read. The AQ will be re-calculated the following month • Incorrect AQ value may only be valid for 1 month • The incorrect read can be flagged to ensure it is not used for future AQ calculation

How Rolling AQ Could Work for each Process • Process 1 & 2: • Calculate AQ monthly based on last 365 days of reads (actual reads & estimates?) • Process 3 • Calculate AQ monthly based on last 365 days reads or • Use last valid read received on the 10th business day to calculate the AQ (based on a [12] month read period) • Process 4 • Use last valid read received on the 10th business day to calculate the AQ (based on a [12] month read period)

PN UNC Workgroup (AQ topic)