Project Nexus

Since the 1990s, the UK’s gas network has been administered by XoServe through their UK Link system. Project Nexus largely came about in anticipation of the implementation of smart and advanced meters and effective processing of the real-time data flow to meet current and anticipated market requirements.

In anticipation of the widespread roll-out of smart and advanced meters, it became evident that the Link System wasn’t going to be able to adequately process the data flow brought about by this and an upgrade would be necessary for the effective administration of critical functions within the network. This pivotal upgrade is called Project Nexus and it was successfully completed on 1 June 2017. Save for those in the energy industry, few noticed the change (something which speaks to the thorough preparations to minimise the effect on consumers), yet Project Nexus introduces a number of benefits which will have an effect on the industry.

How will nexus affect energy customers?

New customers could experience some delay in switching energy providers as they would be unable to register during the upgrade period.

Why is the central gas system being updated?

The outdated system hasn’t had a big upgrade like this since the late 1990s, so by replacing the old system, the gas industry will see some major benefits with an increase in the system’s ability to receive, store and deliver data, ideal for supporting the rollout of smart meters.

Project Nexus yields a number of benefits by virtue of additional available data and this is being used to implement changes to benefit the industry. Overseen by Ofgem and PwC, the switch from old system to new took place between 23 and 31 May with normal service resuming by 6 June. Although the changeover from the old system to new passed by between 23 and 31 May largely without incident, it is the long-term benefits of this infrastructural change that stand to be felt on the ground over time. Overseen by industry regulators, Ofgem and PwC, these bodies were tasked with managing the change to ensure the new system met industry requirements, there was a positive customer experience, it was stable and sustainable.

Within the network’s geographical regions, where mains gas is unavailable, these networks are maintained by independent gas transporters. Previously faced with the challenge of an inability to share information, these IGTs are now able to communicate more clearly with suppliers, resulting in expedited processes.

Settlement procedures are another key area standing to benefit from the changes. As gas shippers update their systems to be in line with Project Nexus, more frequent meter reads will be used within the settlement process. As the change in calculation of unidentified gas is implemented, fairer and predictable invoicing by suppliers – together with the new AQ process and the new settlement classes – are notable changes within this area.

Project Nexus gas: where we are now and where we are going

Why was Project Nexus necessary?

With the nationwide roll-out of smart meters, the Link System faced the inability to process real-time data flow. The upgraded link system, in addition to having favourable consequences in the form of efficient communications within the gas network and a streamlined settlement procedure, offers a platform better suited to future changes within the gas industry and a smooth experience from supplier to consumer. As participants update their IT systems, these will work with the new XoServesystems for a better all-round experience.

Effects

Ogfem had four criteria by which it was to manage the transition from old system to new:

• industry requirements met
• positive customer experience
• stability of the new system
• sustainability of the new system

Energy suppliers could not communicate with XoServe and this appears to be the source of the light delays consumers may have experienced when switching gas suppliers during the changeover period.

Looking ahead

The long-term effects of Project Nexus stand to benefit the industry. The introduction of new settlement classes is anticipated to streamline the settlement procedure and make for fairer and more predictable invoicing. Furthermore, independent gas transporters (who are responsible for maintenance of networks where mains gas is unavailable) are now able to communicate more effectively with the gas network, resulting in cost savings and improved service standards for switching and other functions.

In addition to this, the new system has seen a change in how metered annual consumption is calculated, with XoServe now being able to provide more accurate figures calculated on a month-by-month basis depending on the settlement clause and a meter reading being provided. Further, the new system gives a more accurate view of unidentified gas as a result of changed calculation of same once meters are individually settled in conjunction with the new monthly AQ>process.

FAQ: Project Nexus and its effect on ‘unidentified gas’

Project Nexus was implemented in June 2017 by the UK gas industry as a revised solution to the former central IT system, which saw the arrival of new read and settlement processes. The crucial outcome of this change was the replacement of the Unallocated Gas (UAG) process with the Unidentified Gas (UIG) process.

Here are some of the answers to your frequently-asked questions about Project Nexus:

Q. Why was Project Nexus implemented?

A. The UIG Process aims to provide a more accurate overview of the volume of unidentified gas. Prior to Project Nexus, the volume of unidentified gas within the non-domestic sector was calculated by independent vendors. Subsequently, some suppliers absorbed the cost of UIG themselves as opposed to passing the cost onto the customer. However, the balance of suppliers factored this cost into their customers’ invoices, causing those on pass-through contracts or those who have multiple gas supplies to incur hefty costs.

Q. How does is UIG calculated?

A. Project Nexus derives the quantity of UIG by utilising a formula that deducts shrinkage from the daily metered (DM) allocations and non-daily metered (NDM) from the total gas input daily. The amount of gas ‘missing’ is considered the UIG volume.

Q. What are the changes?

A. Since inception, significantly higher levels of UIG have been recognised within the industry. This has resulted in suppliers upping their charges, which in turn, has affected the customer’s pocket. Moreover, the volatility of UIG has aggravated the issue, worsened by the fact that investigations into establishing the cause behind the volatility, cannot be fully determined nor understood.

Q. Does this change affect all suppliers?

A. Yes, all gas suppliers are affected by Project Nexus changes.

Q. How significant are the changes?

A. Prior to Project Nexus, the cost incurred as a result of UAG for industrial and commercial customers was between 1 and 2%. Despite the introduction of a revised system, monthly tariffs are between 6 and 11%, showing no notable reductions in these costs.

Q. How is the cost calculated?

A. Suppliers are informed daily of the proportion of UIG that is allocated. In addition, each month a reconciliation is calculated for all months prior to June 2017 (taking place only when actual reads are processed by XOSERVE) thus generating a reallocation of UIG costs. This monthly cost is then factored into the overall gas price.

Q. How will customers be made aware should the situation improve?

A. Smarter Business account managers will regularly keep our customers abreast of any updates.

Q. What are suppliers doing about it?

A. One of the key priorities for all suppliers is to address the high UIG levels, a matter has been brought before Ofgem and XOSERVE as a matter of urgency. Gas suppliers are making a collective effort to bolster initiatives (both supplier and industry-steered) to reduce the high levels of UIG and eliminate volatility.

What is changing?

Independent Gas Transporters

Independent Gas Transporters (IGTs) of any size will be able to store and transfer information using the Xoserve central IT system, allowing suppliers to access relevant IGT data quickly and efficiently.

Formula year Annual Quantity and Supply Offtake Quantity (AQ/SOQ)

Replacing the current October cycle, the Formula AQ/SOQ will be fixed from April 1st to March 31st every year to fall in line with the changes to IGTs. These will be used to calculate transportation charges (with most cases being based on the Rolling Annual Quantity and Supply Offtake Quantity from December 1st the previous year).

Rolling Annual Quantity (AQ) and Supply Offtake Quantity

With the new system update, Xoserve will be able to provide more accurate figures for consumption and provide a new rolling annual quantity calculation every month (based on a meter reading being provided each month and dependent on settlement class).

Meter Settlement Classes

There will be 4 settlement classes, allowing accuracy to be improved in an effective way. Including changes to existing meters, the classes will be structured as follows:

Unidentified Gas Charge Removed

Unidentified gas (UIG) will now be calculated in a different way to allow for an increase in accuracy in calculations.

A share of unidentified gas will be allocated between classes for distribution zones and shippers, replacing the old AQ allocation of Unidentified Gas charge(AUG).

Our Smarter Business consultants have their fingers on the pulse of changes within the gas industry and what this means for your business. Contact us to discuss strategy, invoicing, and how your business stands to benefit from partnering with us for all of your energy and gas requirements.