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.