1. 1 Mod Review Group 126 Mar 2007 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. 2 Mod Review Group 126 Mar 2007 slides 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

3. 3 Mod Review Group 126 Mar 2007 slides 5 year model (4yrs to 4yrs 364 days) 1 st Feb 98 1.4.041.4.051.4.061.4.071.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3 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 1 st 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 1 st April 2005.

4. 4 Mod Review Group 126 Mar 2007 slides 4 year model (3yrs to 3yrs 364 days) 1 st Feb 98 1.4.041.4.051.4.061.4.071.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3 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 1 st 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 1 st April 2006

5. 5 Mod Review Group 126 Mar 2007 slides 3 year model (2yrs to 2yrs 364 days) 1 st Feb 98 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 1 st 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 1 st April 2007 1.4.041.4.051.4.061.4.071.4.08 R1 1.4.09 R2 1.4.10 R3 1.4.11 R4 RIP1 RIP2 RIP3

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

7. 7 Mod Review Group 126 Mar 2007 slides Impact of moving the earliest start date forward, illustration using 5 year model 1.2.98 1.4.08 Charge duration With effect from 1 st April 2008, charges (where required) will be calculated back to 1 st April 2004 1.2.98 1.4.2004 1.4.08 Period now closed Out – not reconciled or adjusted Charge duration Up to 31 st March 2008, charges (where required) will calculate back to 1 st Feb 1998

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

9. 9 Mod Review Group 126 Mar 2007 slides Illustration of reconciliation Estimated consumption Actual consumption Meter reading period R1 R2 DIFFERENCE D1D2D3D4 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. 1.4.2004

10. 10 Mod Review Group 126 Mar 2007 slides Business Rule – applying the effective date  The implementation date for each period will be known in advance i.e. 1 st April each year.  Relevant invoice charges e.g. reconciliation charges, will be calculated to 31 st 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

11. 11 Mod Review Group 126 Mar 2007 slides 1.2.98 1.4.08 Reconciliation invoice issued 24 th April A MPRN reconciliation charge 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 1 st 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 24 th April. On 1 st April the end date rolls-forward to 1 st 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 1 st April each year, and applies to charges to be calculated from 1 st April each year. R1R2

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

13. 13 Mod Review Group 126 Mar 2007 slides 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.

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

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

16. 16 Mod Review Group 126 Mar 2007 slides 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

17. 17 Mod Review Group 126 Mar 2007 slides Business Rule RbD treatment continued 1.4.04 RIP1 RIP2 Adjustment charge period Adjustment invoice issued 1.4.051.4.061.4.071.4.081.4.091.4.10 Period now closed out – not reconciled or adjusted 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 1 st April 2004 to 1 st April 2005, which is now “closed-out”. RbD charges processed

18. 18 Mod Review Group 126 Mar 2007 slides 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.

19. 19 Mod Review Group 126 Mar 2007 slides Business Rule USRVs… 1.2.98 1.4.2004 1.4.081.4.09 1.4.2005 In April 2009, part of the reconciliation charge is now “timed out”. 1.2.98 1.4.2004 1.4.081.4.09 Reconciliation charge period (USRV) In February 2008, a reconciliation charge is calculated which results in a USRV Reconciliation charge period (USRV) Period now closed out – not reconciled Period now closed out – not reconciled R1 R2

20. 20 Mod Review Group 126 Mar 2007 slides Business Rule USRVs continued, recommended treatment 1.2.98 1.4.2004 1.4.081.4.09 Revised reconciliation charge period 1.4.2005 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 1.4.08 Period now closed out – not reconciled 1.4.09 Reconciliation charge period (USRV) In February 2008, a reconciliation charge is calculated which results in a USRV Period now closed out – not reconciled

21. 21 Mod Review Group 126 Mar 2007 slides Business Rule USRVs continued, recommended treatment  Other options for treatment exist such as releasing the USRV immediately prior to the 1 st 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.

22. 22 Mod Review Group 126 Mar 2007 slides 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

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

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

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

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

27. 27 Mod Review Group 126 Mar 2007 slides 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.

28. 28 Mod Review Group 126 Mar 2007 slides Unreconciled I&C energy Unreconciled Energy by Calendar Year 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 199819992000200120022003200420052006 Year of Unreconciled Volumes Energy (Twhs) 0.00% 4.00% 8.00% 12.00% 16.00% 20.00% 24.00% % of Original Allocations Unreconciled UnReadSuppressed% Unreconciled

29. 29 Mod Review Group 126 Mar 2007 slides Pre first cutover considerations  Based upon a first cutover date of [1 st April 2008], bringing the earliest start date to [1 st April 2004], the industry may wish to work towards:  Resolution of any aged operational queries  Resolution of USRVs  Reconciliation of unread meters 