Utility Week

6 | 22ND - 28TH JUNE 2018 | UTILITY WEEK Policy & Regulation Analysis O ver a year ago, and around a decade aer it was initially conceived, Xos- erve switched on the successor to its ageing IT system for gas settlement and sup- ply point administration. The replacement scheme, known as Project Nexus, meant that for the first time meter reads from all types of supply points could be fed into the gas settlement system – no matter their size or how oen they were read. Accordingly, reforms were made to the relevant industry arrangements to allow for this to happen. These included an overhaul to the process for allocating what's known as unidentified gas: that which cannot be attributed to metered consumption, for example because of meter error or the. However, the new system has come with unintended consequences, which is causing shippers and suppliers massive headaches. Old versus new Prior to the completion of Project Nexus, gas was allocated using a top-down procedure known as "reconciliation by difference". Under this model, any gas fed into a local distribution zone (LDZ) that could not be attributed to leakages ("shrinkage"), gas transporters or daily metered (DM) supply points – including any unidentified gas – would initially be allocated to non-daily metered (NDM) supply points. Over time, allocations were adjusted as meter readings were submitted for larger NDM supply points. However, there was no individual reconciliation for smaller NDM supply points. Although efforts were made to spread the costs of unidentified gas across the market in recent years, generally speaking this meant the smaller NDM supply points ended up picking up the tab. Now, with the ability to reconcile all supply points, the procedure has changed. Rather than being grouped together with all gas allocation to NDM supply points, unidentified gas has become a distinct term. Each day, the amount is estimated using an algorithm that incorporates projections for consumption by NDM supply points. This volume is spread proportionally across all meters. Adjustments are made as meter read- ings are submitted over the following months and years, gradually revealing the true figure. But these new arrangements have brought some major headaches for gas ship- pers and suppliers. Notably, the amount of unidentified gas is far higher than expected. Before the changes, the volume of unidentified gas was estimated at 1 to 1.3 per cent of total demand. The Joint Office of Gas Transporters (the body that administers the Uniform Network Code (UNC) governing the supply and transportation of gas) says the figure has since averaged 4.65 per cent. Worse, the daily estimates has fluctuated wildly, from as much as 25 per cent of total demand to zero. The task of forecasting and managing costs has become much more difficult as a result. In an effort to solve the problem, industry parties proposed three code modifications: UNC642, UNC642A and UNC643. Both UNC642 and UNC643 sought to revert to the pre-Nexus reconciliation by difference settlement process. The former was proposed by Corona Energy and the latter by Orsted. Unidentified gas would be set at a fixed level, starting at 1.1 per cent in the first year, and would be allocated proportionally to all meters. A new variable of "settlement error" Where has all the gas A new IT system introduced to accurately establish left shippers and suppliers with wildly fluctuating investigates the mysterious case of the 'unidentified

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