Gazifère Inc.
UUF analysis
This report discusses technical issues surrounding unbilled and unaccounted-for
gas (UUF) for Gazifère. In its decision D-2007-90, the Régie requested that, in
the 2007 closing of the books, Gazifère file an update on the effect of the billing
cycle on the volume of gas lost; its conclusions as to the effect of accounting for
unbilled gas on a financial-year basis, and a follow-up and detailed results from
its analysis of the impact of growth in the residential market on UUF. All figures
are reported in calendar year terms.
Section 1: Historical Analysis
Unbilled and unaccounted-for gas (UUF) in any given period is equal to the
difference between sendout volumes and sales volumes. UUF is usually a
positive number although it can be negative.
A number of factors are generally thought to cause UUF, including elevationrelated pressure effects, billing cycle effects, and leakage due to theft, third party
damages, and system expansion. The measurability of these factors varies. It is
our opinion that reasonable estimations can only be performed for pressure,
billing, and residential system expansion effects given the available data.
Elevation-related Pressure Effects
Until 2002, billing for EGD and Gazifère assumed a single average height above
sea level and, therefore, an implied single atmospheric pressure for all residential
meters. However, it has been found that atmospheric pressure in the Hull,
Gatineau and Aylmer municipalities is approximately 0.54% higher than the
assumed pressure, understating sales and overstating UUF.1 Beginning in 2002
these effects were taken into account in the billing system and thus elevationrelated pressure effects are no longer considered to be a UUF issue for Gazifère.
Section 2: Billing Cycle Effects
Billing Cycle Update
Since billing cycles do not match calendar months, each January starts with a
certain amount of gas consumed in December of the previous year still yet to be
billed. Similarly, the end to the year arrives before a certain portion of gas
consumed in December of that year has been billed. As a result, annual sales
are overstated by a portion of the previous year’s consumed volume and
understated by a portion of the current year’s consumed volume. It is reasonable
for the unbilled number to fluctuate between positive and negative values. By
calculating the change in unbilled between two years, billing cycle effects can be
1
The assumed pressure was 14.48p.s.i.a., while Gazifère’s regions are 14.56p.s.i.a.; a difference
of 0.54% between the two.
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UUF analysis
identified.
To calculate the split between volumes billed in January but consumed partially
in December and partially in January, we make use of the Rider C reports. The
rate rider C is a rate charged in addition to the standard gas billing rate and is
adjusted each quarter. When the adjustment takes place on January 1, we are
able to determine the amount of gas consumed before or after that date. Using
this information for billing in January 2007 and January 2008 determines unbilled
volume in 2006 (gas consumed in December 2006 but not billed until January
2007) and unbilled volume in 2007 (gas consumed in December 2007 but not
billed until January 2008), respectively. The following table outlines the
calculation (values in 103m3).
2007 Calendar Year Billing Cycle Effects
2007
Overstated (Dec
2006 Volumes)
Understated
(December 2007
Volumes)
Total Unbilled
7,559.50
8,317.90
758.40
The positive unbilled number implies that billing cycle effects resulted in a lower
billed amount of gas in 2007 than was consumed in the same calendar year.
Using information on the number of unlocked customers on each cycle and total
December daily gate sendout, an estimate on previous unbilled amounts can be
determined. The following table illustrates that 2007’s unbilled volume is roughly
in line with historical norms.
Fiscal Year versus Calendar Year
Prior to 2006 Gazifère operated on a fiscal year basis with the year ending in
September rather than December. In terms of the unbilled description above, the
fiscal year begins in October with a portion of September of the previous year’s
consumed gas yet to be billed. Similarly, the fiscal year comes to an end before
a portion of gas consumed in September has been billed.
The unbilled portion is intuitively going to be more variable with a December year
end rather than a September year end due to the higher volumes consumed in
December.
In the following table, the first two columns represent the estimated total unbilled
volumes at year end in calendar and fiscal years, respectively. As discussed,
December consumed volumes are higher than September, and so are the
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Gazifère Inc.
UUF analysis
unbilled volumes. In terms of UUF calculations, we are interested in the change
in unbilled from year to year, displayed in the final two columns. Because the
variability is more significant in the case of a December year end, the change in
unbilled is also much larger.
2003
2004
2005
2006
Average
December
Unbilled
Estimate
9,046
11,818
5,759
7,560
8,546
September
Unbilled
Estimate
1,666
1,810
1,455
1,021
1,644
Change in
Change in
Unbilled
Unbilled
(Dec year-end) (Sept year-end)
-648
691
2,772
144
-6,059
-355
1,800
-434
-1,312
160
Section 3: Residential Customer Growth Effects
Residential customer growth has been steady in the Gazifère region, averaging
approximately 5% per year in the ten-year period starting in 1997. Lost gas is
associated with adding customers through meter installation, pipeline activity,
and appliance hook-up. Once a customer is added, lost gas can be the result of
accepted metering tolerances for each residential meter.2
Due to data constraints, it is difficult to quantify the relationship between
unaccounted-for gas and the residential market. The amount of gas lost during
these instances is unknown and must be estimated based on historical
relationships between lost gas and residential customer growth. Specifically, the
impact of the residential market is estimated by regressing the remaining
unaccounted-for gas (after removing the unbilled portion) on a two year moving
average of residential customer additions. By using the average over two years,
the variable is able to encompass the total residential impact on unaccounted-for
gas. Present year customer additions take into account the physical aspects of
adding customers such as additional pipes and meter installation, while the
previous year’s additions explain the impact of those customers consuming gas
for the first time in the present year. In addition, there can be variability in when
a customer is officially recorded as an “add” and the length of time between a
recorded add and the flow of gas to the new customer. Due to the potential time
lag, a single year’s adds will not fully capture the impact of that year’s residential
market activity.
The statistically significant residential market model captures approximately 35%
of the variability of the remaining unaccounted-for gas. Performing an in-sample
forecast of this model provides a reasonable estimate of the residential market
2
The allowed tolerance band for meter accuracy is +/-1%
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UUF analysis
portion of unaccounted-for gas (UAF). The following tables outline the residential
market impact and total explained and unexplained UUF.
2002
2003
2004
2005
2006
2007
Total UUF
-1,460.27
-507.67
6,549.59
293.09
1,640.72
1,197.41
UUF Due to
Billing Cycle
-2,114.14
-648.08
2,772.44
-6,059.02
1,800.30
758.40
2002
2003
2004
2005
2006
2007
Average '02-'04
Average '05-'07
Toal Average
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UUF Due to
Residential
Market
-1,425.95
2,530.54
2,899.36
2,416.54
9.11
1,162.53
Total UUF as %
of Sales
-0.84%
-0.31%
4.29%
0.20%
1.02%
0.71%
1.05%
0.64%
0.84%
Total Explained
UUF
-3,540.09
1,882.46
5,671.80
-3,642.49
1,809.41
1,920.93
Total
Unexplained
UUF
2,079.82
-2,390.13
877.79
3,935.58
-168.69
-723.52
Unexplained
UUF as % of
Sales
1.20%
-1.46%
0.58%
2.62%
-0.10%
-0.43%
0.10%
0.70%
0.40%
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