unc modification proposal 0224 - daily metered elective action 005: user pays proposal simon...

UNC Modification Proposal 0224 - Daily Metered Elective

Action 005: User Pays Proposal

Simon Trivella – 4th November 2008

Development Work Group 0224 - Millbank

Purpose

• Action from previous 0224 Development Work Group meeting

• Background to User Pays

• Overview of Mod 0213 (User Pays Governance Arrangements)

• User Pays Mod Proposal Guidance Document

• Apply principles to Mod 0224

• WARNING – All above is Work in Progress

Background

• User Pays introduced through GDPCR & UNC Mod 0188

a) Code Services (contained within UNC / ACS)

b) Non-Code Services (ACS / Framework Agreement / UPUG)

• UNC Mod 0213 – Governance Arrangements for User Pays

a) Code Services only

b) Amendments to Modification Process

c) Production of User Pays Modification Proposal Guidance Document

UNC Mod 0213 - Principal aims

1) Proposal states whether it is User Pays

a) Introduces User Pays Services / User Pays Charges

b) Changes User Pays Services / User Pays Charges

2) Proposal states how User Pays Service is to be funded

a) Cost Types

i. Analysis Costs (if any)

ii. Development Costs (if any)

iii. Ongoing Service (Transactional) Costs (if any)


2) Proposal states how User Pays Service to be funded

b) Transporter / Shipper User split for each Cost Type (if different)

c) Shipper User cost allocation for each Cost Type

d) Analysis / Development Cost recovery period (if required)

3) Proposal gives supporting arguments in each case


4) Proposal discussed at appropriate industry forum

a) Workstream, Development Work Group or Review Group

5) Transporters required to produce cost estimates

a) Rough Order of Magnitude (ROM)

i. Part of administrating the UNC process (funded via GDPCR)

b) Detailed Cost Analysis

i. Funded through appropriate User Pays mechanism


6) Cost estimates recorded in Draft / Final Modification Reports

7) Authority View can be sought on appropriateness of funding

a) Uses current arrangements within Modification Rules

b) Authority View on current Proposal only

8) Changes to the Modification Proposal pro-forma

a) Additional sections to capture User Pays related information


9) Only applies to Mod Proposal raised after implementation

a) Does not prevent User Pays Services / Charges being created

b) ACS Amendments required to facilitate new Services / Charges

c) Further Modification Proposal required

10) Provides for Agency Charging Statement (ACS) amendments

a) Draft report on ACS amendments to be considered with FMR

b) Indicative User Pays Charges to be reflected within ACS

Guidance Document

1) User Pays Modification Proposal Process Steps

a) Guidance for all parties

b) Process flow diagrams

2) ROM Analysis Document

a) Cost breakdown

b) Assumptions / issues

Guidance Document

3) Detailed Cost Analysis Document

a) Evaluation Summary

b) Key Business Requirements

c) Implementation Timescales

d) System impacts

e) Firm costs

f) Assumptions

Guidance Document

4) Costs Allocations

a) Industry Cost Allocation Matrix (ICAM)

i. Suggested percentage splits for Transporter / Shipper (25% basis)

ii. Ability to align with benefits from furthering relevant objectives

b) User Cost Allocation Matrix (UCAM)

i. Practical examples

ii. Targeting costs

iii. Default arrangements provided for in ACS (industry ‘as-is’ cost)

Required ACS Amendments

1) User Pays Service for Analysis costs

a) Non-Implemented Modifications

b) Analysis costs ‘sanctioned’ by Modification Panel / UNCC

c) Default ACS ‘industry’ cost recovery over [12] months

2) User Pays Service for Analysis and/or Development Costs

a) Implemented Modification Proposals

b) Possibility for multiple methodologies to reflect UCAM


3) Transactional Cost loading

a) Incorporates Analysis / Development costs in Transactional Charge

b) Targets costs appropriately (cost reflective)

c) Recoverable over [x] months

d) Potential to ‘skew’ Transactional Charges

i. Barrier to service ‘take-up’

ii. Stranded Transporter costs


4) Methodology for Development / Transactional Cost Ratio

a) Prevent prohibitive charges

b) Transactional Charges to contain Analysis / Development costs

i. Limited to an increase of [40%] in Transactional Charge

ii. Limited to an ‘ceiling price’ (e.g. max Transactional Charge of [£100] )

iii. Set recovery period of [12] months

iv. ‘Stranded’ costs recovered in accordance with ACS default arrangements

Mod Proposal 0224 and User Pays

RG175 ROM Analysis provided range of estimated costs

Supply Point Number

Core System Change Costs

Offline System Replacement

Costs

Analysis Costs (included within Core

Change Costs)

Xoserve Direct Project Delivery

Costs

<25,000 £270K - £395K £40K - £60K £40K £70K - £95K

Supply Point Number

Operational Costs per annum

System Invoicing & Adjustment

Capability

<25,000 £135K - £348K £40K - £60K


• Cost Types (estimates)

1. Analysis Costs ~ £50k

2. Development Costs ~ £500k

3. Ongoing Service Costs ~ £450k p.a.

• Transporter / Shipper User Split of 0% : 100%

• Proposed recovery period of [12] months (not in 0224)


• Ongoing Estimated Service Costs (full demand of 25,000)

• Total of £450k to be recovered

• £18 per supply point per annum

• [40%] increase in first 12 months for Development Costs = £25.20 p.a

• Potential for additional charges

• Additional services

• Service ‘misuse’ / cost targeting


• Ongoing Estimated Service Costs (demand of 5,000)



• [40%] increase in first 12 months for Development Costs = £126 p.a

• Potential for additional charges

• Additional services

• Service ‘misuse’ / cost targeting


• Ongoing Estimated Service Costs (demand of 500)



• [40%] increase in first 12 months for Development Costs = £1,260 p.a

• Costs may outweigh Benefits

• Analysis / Development Costs recovered in line with ACS


• Analysis / Development Estimated Costs (any demand)

• £550k total cost

• Recovery over [12] months

• Reduction due to Transactional / Service Cost loading of [40%]

• £370k to be recovered

• LSP Supply Points (~450,000) = £0.82p per Supply Point

• All Supply Points (~24m) = £1.54p per 100 Supply Points

• Group of Shippers [4] = £92,500 per Shipper


• Analysis / Development Estimated Costs

• Ceiling Price of [£100] for Service Costs

• Demand of <4,500 would cause under recovery

• All Analysis / Development Costs would be recovered separately



• Ceiling Price of [£200] for Service Costs

• Demand of <2,250 would cause under recovery

• Demand of 25,000

• All Analysis / Development costs recovered through Service Costs

• Ceiling not reached, Service Cost of £40 per Supply Point



• Demand of 5,000

• All Analysis / Development costs recovered through Service Costs

• Ceiling reached, Service Cost of £200 per Supply Point

• Demand of 3,000

• Ceiling reached, Service Cost of £200 per Supply Point

• £150k of Analysis / Development costs recovered through Service Costs

• £400k of Analysis / Development costs to be recovered separately


• Analysis Costs (Non-Implementation)

• As Proposal is pre 0213, analysis costs would not be recovered

• If recoverable under ACS, £50k over [12] months

• All Supply Points (~24m) = £0.21p per 100 Supply Points

Next Steps

• Modification Proposal 0213 to November Panel

• Request to go out to Consultation

• Guidance Document to be developed in parallel

• [DCA] to be produced for Mod 0224

• Transporters to propose ACS amendments

• Transporters to raise further UNC Modification

UNC Modification Proposal 0224 - Daily Metered Elective

Action 005: User Pays Proposal

Simon Trivella – 4th November 2008

Development Work Group 0224 - Millbank

unc modification proposal 0224 - daily metered elective action 005: user pays proposal simon...

Documents

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user paysintroduces

user paysoverview of

appropriate user

chargeschanges user

fmrindicative user

unc modification proposal

mechanismunc mod