1. Xoserve Draft UIG Incentives Modifications 20 May 2019
UNC UIG Workgroup
Xoserve Draft UIG Incentives Modifications 20 May 2019

2. Background
A number of Xoserve recommendations to address UIG causes would require UNC Mods
Two batches of Mods have previously been presented at previous Workgroups
Xoserve has previously presented a proposal for an Incentive Scheme which uses UIG as a charging mechanism
Xoserve has drafted a Modification and published them on the UIG page of Xoserve.com and on JO website
These slides summarise the Mod in the format of a Mod Panel briefing to aid understanding

3. Draft UNC Modification
Use of Additional Unidentified Gas Charges as a Performance Incentive Mechanism

4. Why change?
UIG Task Force has identified a number of areas where Shipper performance against existing UNC obligations can significantly affect the level and/or volatility of UIG e.g.
Meter read submission levels
Incorrect Conversion Factor
Incorrect Meter Read Frequency
There has been much discussion in forums like PAC and UIG Workgroup that there are limited levers in the current regime to enforce performance
Xoserve proposed the principles referred to here at April 29 UIG Workgroup as a way of introducing a menu of possible measures which use UIG as a targeted incentive measure

5. Options
Enhanced PAC monitoring – instruct PAFA to raise performance with relevant Shippers – PAFA has no enforcement tools at present
Escalate all performance issues to Ofgem – workload could be considerable, industry should be able to manage its own performance
CDSP to raise performance with relevant Shippers – CDSP has no enforcement tools
Recommended option: a mechanism which bills extra UIG to parties which are not meeting their UNC performance obligations and redistributes the extra UIG via existing UIG Reconciliation processes

6. Solution
Sites where performance standards are not met could be charged additional UIG to reflect the increased risk
Existing Amendment Invoice UIG sharing mechanism is used to share out the equal and opposite amount of UIG to keep total UIG “whole” and not overcharge total UIG
Party who receives a charge also receives a share of the UIG credit but it will always be less than the amount paid, so always creates an incentive
List of performance areas and the charging rate applied would be set out in a UNC Related Document, could be changed by UNCC simple majority

7. Suggested Calculation
Determine an average UIG level for the preceding [12 months] e.g. 3.5%
Apply a multiplier to reflect the increased risk to the whole industry e.g. [2 times] the average UIG level
On a monthly retrospective basis, for meter points/AQ which is contributing to UIG or UIG risk, e.g.:
= AQ at risk ÷ 12 x average UIG level x multiplier x SAP price
UIG priced at average SAP for the performance month

8. Worked Example Shipper A has 11,000,000,000 kWh of AQ in Class 3
100%
Above standard
Shipper A has 11,000,000,000 kWh of AQ in Class 3
Meter read performance target of 90%
Actual read performance 64.3%
UIG charge = 11 tWh/12 x ( ) x 3.5% x 2 x 1.62p* = £267,151 charge for month
Equal and opposite shared out via UIG sharing on Amendment Invoice
90%
Standard not achieved – extra UIG charge
64.3%
Standard achieved – no charge
* Average SAP price for February 2019

9. Recommended Steps
Xoserve has drafted a suggested Mod – to be published on Xoserve UIG page (under Findings and Recommendations)
A UNC party would need to sponsor and raise the Mod
Sponsoring party could amend the proposal prior to submission
Xoserve can support the discussions at Mod Panel, Workgroups etc.