1. Unbilled Revenue Presented by Mindy Willis Orlando Utilities Commission

2. Outline I. About OUC II. Purpose III. Background & Changes IV. High-level process overview V. Calculating revenue in cut-off period VI. Pro-rating revenue in the cut-off period VII. Methods for Calculating the Billing Day Percentage

3. I.About OUC Located in Central Florida Located in Central Florida Annual revenues of $746 million (2006) Annual revenues of $746 million (2006) Total assets of $2.7 billion (2006) Total assets of $2.7 billion (2006) Total active electric retail customers 198,346 (2006) Total active electric retail customers 198,346 (2006) Total active water customers 132,512 (2006) Total active water customers 132,512 (2006)

4. II. Purpose To ensure there is a clear cut-off of metered retail revenue earned but not yet billed for electric, water and chilled water services. To ensure there is a clear cut-off of metered retail revenue earned but not yet billed for electric, water and chilled water services.

5. III. Background & Changes OUC records unbilled revenue on an annual basis OUC records unbilled revenue on an annual basis Unbilled revenue is recorded for electric, water, chilled water and streetlight services. Unbilled revenue is recorded for electric, water, chilled water and streetlight services.

6. III. Background & Changes (cont’d) About 4 years ago we began “unbundling” accrued unbilled revenue – to match how monthly revenue is recorded. About 4 years ago we began “unbundling” accrued unbilled revenue – to match how monthly revenue is recorded. Up until 3 years ago we waited to record unbilled revenue for September when October revenue was known. Up until 3 years ago we waited to record unbilled revenue for September when October revenue was known. Up until 2006, we recorded both energy and fuel revenue in our accrued unbilled revenue amount. Up until 2006, we recorded both energy and fuel revenue in our accrued unbilled revenue amount.

7. III. Background & Changes (cont’d) Beginning in 2006, unbilled fuel revenue was stabilized (deferred). This change brought the unbilled revenue methodology in-line with how fuel revenue is recorded on a monthly basis throughout the year. Beginning in 2006, unbilled fuel revenue was stabilized (deferred). This change brought the unbilled revenue methodology in-line with how fuel revenue is recorded on a monthly basis throughout the year.

8. III. Background & Changes (cont’d) Although we only recognize revenue for unbilled energy sales; we do calculate the total unbilled revenue and deferred the fuel portion. Although we only recognize revenue for unbilled energy sales; we do calculate the total unbilled revenue and deferred the fuel portion. The general ledger includes both the gross receivable and the fuel revenue reduction. The general ledger includes both the gross receivable and the fuel revenue reduction.

9. III. Background & Changes (cont’d) The Statement of Net Assets shows the net accrued unbilled receivable. The Statement of Net Assets shows the net accrued unbilled receivable. Displaying the net accrued unbilled allows the fuel stabilization liability to be presented at an amount equal to the corresponding internally designated funds. Displaying the net accrued unbilled allows the fuel stabilization liability to be presented at an amount equal to the corresponding internally designated funds.

10. IV. High-level Process Outline 1. Determine revenue earned through the cut-off month. 2. Pro-rate this revenue to reflect the number of billing days the revenue was earned in the cut-off period.

11. V. Calculating Revenue in Cut-off Period First, using seasonal data closest to the cut-off month, establish a revenue per unit of measurement First, using seasonal data closest to the cut-off month, establish a revenue per unit of measurement –For example we utilize the billed revenue, excluding any stabilized funds, for July and August to derive the revenue per unit of measure (kwh or mgal) for the month of September, our year-end cut-off period.

12. V. Calculating Revenue in Cut-off Period (cont’d) Sample calculation of energy revenue per kwh

13. V. Calculating Revenue in Cut-off Period (cont’d) Second, the cut-off period total generation (water, electric or chilled water) is obtained and then multiplied by the estimated revenue per unit of measure. Second, the cut-off period total generation (water, electric or chilled water) is obtained and then multiplied by the estimated revenue per unit of measure. The result of this calculation provides the basis for the cut-off period unbilled revenue or estimated total earned revenue for the month. The result of this calculation provides the basis for the cut-off period unbilled revenue or estimated total earned revenue for the month.

14. VI. Pro-rating Revenue in the Cut-off Period Total estimated revenue is then pro-rated using a billing day percentage. Total estimated revenue is then pro-rated using a billing day percentage. The billing day percentage is calculated based on a weighted average by billing cycle or a percentage of billing days. The billing day percentage is calculated based on a weighted average by billing cycle or a percentage of billing days. The weighted average is calculated using Access queries and establishing revenue recognition percentages for each cycle. The weighted average is calculated using Access queries and establishing revenue recognition percentages for each cycle.

15. VII. Methods for Calculating the Billing Day Percentage Option 1: This option establishes a weighted average billing day percentage using Access tables and extracting revenue billing data by cycle and then delineating the revenue into the respective months they were earned. Option 1: This option establishes a weighted average billing day percentage using Access tables and extracting revenue billing data by cycle and then delineating the revenue into the respective months they were earned.

16. Conclusion & Questions Accrued unbilled revenue is now recorded within the first two weeks of year-end and no longer holds up the closing process. Accrued unbilled revenue is now recorded within the first two weeks of year-end and no longer holds up the closing process. Questions???? Questions????

17. VII. Methods for Calculating the Billing Day Percentage Option 2: This option establishes an average billing day percentage by splitting the total cycle billing period into number of number of days in the prior and current period Option 2: This option establishes an average billing day percentage by splitting the total cycle billing period into number of number of days in the prior and current period For example: Cycle 4 reads on the 5 th billing day of the month and has a meter read period of the 5 th of the prior month through the 4 th of the current month. Therefore, establishing a relationship of 26 days in the prior month and 4 days in the current month or 87% in the prior month For example: Cycle 4 reads on the 5 th billing day of the month and has a meter read period of the 5 th of the prior month through the 4 th of the current month. Therefore, establishing a relationship of 26 days in the prior month and 4 days in the current month or 87% in the prior month