1 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

2 Mod Review Group 126 Feb 07 slides 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 Invoice issued charge period Invoice payment due date July 08 Invoice query period closed out at 18 months To illustrate the present invoicing limitations the example below shows a charge which is end-dated at the present limitation date 1 st February Under UNC rules an invoice query can be submitted up to 18 months from the invoice payment due date

3 Mod Review Group 126 Feb 07 slides For example, with effect from , the Close Out date moved from to x. From this date new charges are end dated at x. Note: The date is shown as effective from , any proposed regime must allow for those charges up to 31 st 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… x Period now closed out

4 Mod Review Group 126 Feb 07 slides … Principle of bringing the restricted invoicing period forward to apply to all invoice types and charges. x Period now closed out x x A MPRN reconciliation charge Reconciliation invoice issued (must include the reconciliation charge 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 , but the Reconciliation Invoice must include all reconciliation charges that became due on and date back to x M+18

5 Mod Review Group 126 Feb 07 slides On , when the Close Out date moved from to x, charges for the period pre x became closed for adjustments Invoice issued Charge period Invoice Payment due date July 08 Invoice query period closed out at 18 months x Close Out date moves forward Example 1 Full period adjustment if query adjusted before 31 st March 08 Example 2 Period of adjustment if query adjusted after Not adjusted What happens to charges on an invoice in the event of a valid query? ….

6 Mod Review Group 126 Feb 07 slides  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?

7 Mod Review Group 126 Feb 07 slides 1 st Feb R R R R R5 On (R1) the close out date moves forward to , on (R2) the close out date moves forward to etc RIP 1 runs from to 31 st 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 31 st March 2009 will go back to a maximum of The following day, when RIP2 becomes “live” an adjustment or reconciliation will go back to a maximum of (note rule required on slides 3 and 4) RIP1 RIP2 RIP3 RIP4 An illustration of Restricted Invoice Periods (RIP)

8 Mod Review Group 126 Feb 07 slides  Considerations  How should the first roll forward from 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

9 Mod Review Group 126 Feb 07 slides All reconciliations processed in 2006 and the year the energy related to Total RbD volumes based on issued Reconciliation invoices for 2006 billing months Year Reconciliation applied to Energy (Twhs) 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% % of I&C Throughput RbD Volume% of I&C Throughput Mod 640 Adjustment

10 Mod Review Group 126 Feb 07 slides Reconciliations  Slide 9 shows the effect of all reconciliations processed in  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

11 Mod Review Group 126 Feb 07 slides Unreconciled I&C supply points

12 Mod Review Group 126 Feb 07 slides 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.

13 Mod Review Group 126 Feb 07 slides 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

14 Mod Review Group 126 Feb 07 slides RbD treatment and processing continued R1R2 x2x1x3R3R4 RIP1 RIP2 RIP3 At R1, RIP1 becomes effective with charges end dating at x1 At R2, RIP 2 becomes effective with charges end dating at x2 Scenario – 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

15 Mod Review Group 126 Feb 07 slides 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 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

16 Mod Review Group 126 Feb 07 slides Activities that can generate “aged” charges  The following activities can lead to charges that currently go back to 1 st February 1998:  Primary Reconciliation charges:  DM reconciliation  NDM reconciliation  LDZ reconciliation  I&C CSEP reconciliation  Adjustment charges:  Invoice and operational queries  Consumption adjustments