Allocation of Unidentified Gas Statement – Interim Report findings17th September 2012

Outline

• Consumption analysis• Theft Analysis• Q&A• Next Steps

Consumption Analysis: Background

• Estimate of Unidentified Gas total

• Uses meter read data for both SSP and NDM LSP market sectors• Compares allocated and metered demand totals• Total UG is the difference between them

• Calculated figure covers all sources of UG• SSP-assigned• LSP-assigned

Consumption Analysis: Data Used

• Data provided for time period 01/04/2008 – 31/03/2011• EA LDZ for pilot study

• Meter read data on MPRN by MPRN basis, EUC included• Allocation data (including CSEPs) at EUC level• List of MPRNs with no meter reads in time period• List of new and lost sites with start/end date• MPRN count by EUC for CSEPs

• Allows MPRN population by EUC to be calculated

Consumption Analysis: Meter Read Data

• LB1 (Lower Bound 1) – the latest meter reading prior to the start of the formula year• LB2 (Lower Bound 2) – the earliest meter reading within the formula year• UB1 (Upper Bound 1) – the latest meter reading within the formula year• UB2 (Upper Bound 2) – the earliest meter reading after the end of the formula year

Consumption Analysis: Calculation Rules

• Select meter reads for consumption calculation using set of rules• Full definition in interim report

• Max time period between LB1 and start of year = 540 days• Max time period between end of year and UB2 = 540 days

• Min distance between selected meter reads = 120 days• Min overlap between metered period and relevant year = 60 days

Consumption Analysis: Calculation

• Calculate consumption for metered period• Convert to formula year consumption using (volume) ALP• Convert to energy using weighted average CV for formula year

• Check against AQ and reject if more than 5 times smaller or larger

• Aggregate to EUC level• Calculate sample size used for each EUC

Consumption Analysis: Final Calculation

• We now have• Actual population for each EUC• Sample size in each EUC• Aggregate demand for sample for each EUC

• Multiply sample demand up to cover full population in each EUC• Add EUC totals to give overall metered total• Subtract from allocated total to give UG

• Use of AQs for missing sites rejected due to inaccurate results

Consumption Analysis: Sample Size

• Sample size consistent for 2009/10 and 2010/11• Lower in 2011/12 due to lack of UB2 for all meters

Formula Year Population Size Sample Size Sampling %

2009/10 1,874,737 1,580,055 84.3%

2010/11 1,893,209 1,597,240 84.4%

2011/12 1,907,835 1,302,069 68.3%

Consumption Analysis: Unidentified Gas Results

• Consumptions and UG calculated as described• Confidence Interval calculated around best estimate

Allocation(GWh)

MeteredConsumption

(GWh)

UG(GWh)

Best Estimate % Low % High %

2009/10 39,805 38,541 1,264 3.18% 2.80% 3.56%

2010/11 41,095 39,985 1,110 2.70% 2.40% 3.00%

2011/12 34,080 33,673 407 1.19% 0.73% 1.66%

Average 2.36% 1.98% 2.74%

Best Low High

UG Estimate (GWh) 803 673 933

Consumption Analysis: UG using AQ Substitution

• Average of a similar order• Year-to-year variability high and includes negative UG

Allocation(GWh)

MeteredConsumption

(GWh)

UG(GWh)

Best Estimate %

2009/10 39,805 38,535 1,270 3.19%

2010/11 41,095 39,910 1,184 2.88%

2011/12 34,080 34,183 -103 -0.30%

Average 1.92%

Consumption Analysis: Comparison with 2011 Method

• Total UG estimates for EA are:• 803 GWh (new method)• 841 GWh (old method)

• Confidence Interval of comparable width

• New method avoids weaknesses and assumptions of old method• Therefore recommend that new method is adopted for 2012 AUGS for

2013/14

Theft Analysis• To consider theft split based on metered + unmetered consumption• Also looked at variations of the above to fix split in time to avoid risk of manipulation• Further alternative method based on throughput

• Also examined issue of theft in a year exceeding 73,200 kWh vs AQ• Modified original method to include this override for like for like comparison with new

method

• Obtained meter reads associated with theft affected sites• Obtained some information regarding customer occupancy changes

Theft – Original vs Alternative Method 1Original methodApportions theft by calendar yearApplies flat profile to allocate theft to calendar yearPre theft AQ used if available otherwise uses current AQ

Multi-year thefts are given one market sector classificationFor comparison modified version of original method with theft override at 73,200 kWh was used

Alternative MethodApportion theft by formula yearApplies ALPs to allocate theft to formula yearMeter reads used to calculate consumption and seasonal adjusted theft added to get sector splitPre/post/current AQ used if consumption calculation failsMulti-year thefts are given individual market sector classificationsIf theft in a year of occurrence exceeds 73,200 kWh assigns to LSP regardless of AQ/consumption result

Metered + Unmetered Consumption• Consumption could not be calculated for ~50% of theft affected sites• Not surprising as meter read data shows

• missing reads• constant values• reads giving rise to negative consumptions etc

• For consumption failures fallback was to use pre/post AQ method

Year of Occurrence

Number of Thefts

Consumption Calculation

Failures

Failure Rate

2007 2001 908 45%

2008 2595 1119 43%

2009 2774 1640 59%

2010 1583 987 62%

Comparison of Original vs Alternative Method results

2007 2008 2009 2010

Original Method

Alternative Method 1

Original Method

Alternative Method 1

Original Method

Alternative Method 1

Original Method

Alternative Method 1

Consumption Calculation Successful

11.5% 13.1% 15.7% 13.0% 19.4% 15.5% 15.8% 8.9%

Consumption Calculation Failed

20.3% 26.7% 29.6% 31.0% 25.6% 24.1% 28.6% 26.4%

Combined 16.4% 19.3% 22.5% 21.4% 23.0% 22.6% 24.8% 20.6%

• Consumption calculation failure related results are similar as expected• Consumption calculation successful results vary and generally give smaller LSP split

than successful consumption calculations (potentially different subset of thefts)

Theft issues – detected theft estimates• The theft estimate is used twice

• for the size of the theft• added to metered consumption to get total when assigning sector

• The theft period is also estimated and subject to error • There are examples where meter reads show potential theft outside of the theft

start/end dates• If over/under estimation of the theft and theft period is unbalanced then this can affect

the overall theft split

Thefts issues - unregistered sites• Unregistered sites illustrates a key problem with the method• Should they be included or not when determining unknown theft split?• Can be interpreted in different ways• If included, unfair to LSP shippers who will claim that the site would not have stolen

gas if it had been their customer• If excluded (and part of Shrinkage) may be seen as unfair by predominantly SSP

Shippers• Anomalies such as this can have a significant impact on the theft split from year to

year

Theft issues – Shipper influences• The theft split can be manipulated by shippers who focus detection on a specific

market sector• The theft split can also be affected by the level of effort in detection and prevention• Detecting theft in a particular sector will increase that market sectors theft portion for

unknown theft and acts as a significant disincentive

Theft Issues – where AQ is used• Where there are customer changes AQs do not always reflect the level of demand for

the previous occupant during theft• Post theft AQ cannot be assumed to be theft affected – there are cases where the AQ

rolls over and adding theft skews the split to LSP • There are also cases where it is affected so to not add theft would skew the split to

SSP• Similarly for pre-theft AQ• Customer changes are generally in the SSP sector, although there are some

examples of customers changing in the LSP sector with similar effects

Variations of alternative method 1• To prevent Shipper influences considered limited detected theft data to end 2011• However, in time the resulting split may be seen as out of date• Further variation to use this split and scale it in line with consumption going forward

Theft split using throughput• Considered split based on NDM LSP vs SSP consumptions• Key assumption is theft occurs in proportion to throughput in each sector• Final figure here based on projection to 2013/14 (to be revised each year)

Sector 2007 2008 2009 2010 2011 Final

NDM LSP 135.1 134.4 134.5 125.0 124.1

SSP 348.7 368.4 379.4 363.2 376.2

Total 483.7 502.9 514.0 488.2 500.3

LSP % 27.9% 26.7% 26.2% 25.6% 24.8% 23.3%

SummaryTheft split based on throughput (NDM LSP vs SSP) • Removes many of the sources of error in the original method• Cannot be manipulated by Shippers• Less volatile over time• Is simple to implement and administer• Provides an incentive to detect and prevent theft

• Recommend theft split to be based on throughput (NDM LSP vs SSP) for 2013/14 onwards

Thank you for your attention