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Modification Proposal 0395 & 0398 – Limitation on Retrospective Invoicing and Invoice Correction 1st December 2011 Modification Proposal 0395 / 0398 Both Modification Proposals seeks to reduce the meter reconciliation period 0395 sets it to a minimum of 2 years and a maximum of 2 years and 364 days 0398 sets it to a minimum of 3 years and a maximum of 3 years and 364 days Current UNC sets it to a minimum of 4 years and a maximum of 4 years and 364 days 2 Cash Impact of the retrospective invoicing limits £10,000,000 £9,000,000 £8,000,000 £7,000,000 £6,000,000 £5,000,000 £4,000,000 £3,000,000 £2,000,000 £1,000,000 £Current Cut-Off 3 Year Cut Off 2 Year Cut Off Meter Error Not Reconciled 3 Aberdeen SC006 SMER Early estimate of the magnitude of the error included daily correction factors of: 1.55787 for the period 21/09/09 to 27/07/10 3.01056 for the period 28/07/10 to 09/08/10 Using actual flow data and system average prices gives a result of: 2009-10 £18,657,966 2010-11 £7,814,778 Bearing in mind the timescales for delivering the SMER through the industry’s LDZ Meter Error Guidelines and invoicing it, clearly there is a risk to the NTS shipping community were the £18M to fall outside the timescales proposed in 0395 or 0398. Later implementation of either mod proposal would perhaps allow Aberdeen to be reconciled. It must be stressed the figures quoted here are illustrative only. The results of the Aberdeen SMER are for expert determination. 4 Mod 0395 impact on Error Detection & Reconciliation Timeline Period reconcilable under Mod 0395 Industry Process NG Process • Appointment of ITE(s) • ITE Testing/Analysis • Compilation of Report • Agreement of Report (Potential of feedback loop) • Publication of Final Report Data sent to xoserve via RBD return Reconciliation invoices due date Typical Process Reconciliation invoices issued It is in the gift of the industry to determine the time of total time to produce the final report. Data sent to xoserve via RBD return UKT obtain financial sanction SMER Process UKT begin review of SMER 27/09/10 Notification to Joint Office 21/07/10 Error detected following 2010 validation 01/04/10 Code cut-off date under mod 395 for fiscal year 2012-13 21/07/09 Last Good meter reading (2009 validation) 3 months 5 Impact of proposed retrospective invoicing limit on the Transmission Activities Much of the evidence presented in support 0395/0398 is in terms of DN RbD activities. Less analysis of impact that Proposals may have on NTS Users, particularly in respect of NTS/LDZ meter reconciliation. 0395 proposer’s analysis identifies that majority of LDZ meter errors are under-reads. The risk from not re-apportioning under-read energy at an NTS/LDZ offtake sits with the NTS Shippers through the Shrinkage Incentive. 6 Background information National Grid Transmission’s UAG role and performance National Grid NTS role in reducing UAG NG NTS is cash neutral with regard to NTS/LDZ Offtake Meter Reconciliation. NG NTS does not own NTS/LDZ meters. NTS Connected Meter Assets predominantly owned by DN’s, Terminal Operators and Large Industrial End Consumers NG NTS has a Meter Assurance role and therefore monitors Asset Owners’ compliance with meter validation obligations NG NTS may also assist the Asset Owner in the discovery of meter errors through its Data-mining initiatives. 8 NG NTS Meter Assurance Role NG NTS has to date received zero UAG incentive revenue. Since 2009 NGG NTS has undertaken a range of activities to address UAG. NGG NTS has incurred additional cost for carrying out these activities and delivered User benefits. Costs of Data Mining from April 09 to date ~£240,000. NG NTS Data Mining has contributed toward discovering measurement errors at both entry and exit. 9 UAG Costs as a % of throughput For 2009/10 value of UAG compared to overall system throughput was 0.6%. With a gross value of ~£100m p.a for 2009/10 With correction of recent Significant Meter Errors, Data mining has contributed to an estimated UAG reduction to 0.5% of overall system throughput, with a significant reduction in gross cost to the industry. 10