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Understanding cash outs

The cash outs functionality in nGenue ensures that end users or facilities are billed fairly when their actual gas consumption deviates from their contractual volumes. In gas transportation and marketing, it is common for customers to either consume more (long cash out) or less (short cash out) gas than agreed upon in their contract. The cash out mechanism is designed to reconcile these imbalances through additional charges or credits based on pricing rules defined in the system.

Cash outs can be configured as either fixed-price or index-based (e.g., linked to daily market indices such as Houston ship channel (HSC)). When customers consume more than their contracted volume, a long cash out charge is applied to the excess quantity. Conversely, when consumption is below the contracted volume, a short cash out credit is issued for the unused quantity.

The cash out swing provides flexibility by defining an allowable tolerance range before cash outs apply. For example, if the swing is set to 10% and the contractual volume is 1000 MMBtu, cash outs will apply only if actual usage exceeds 1100 MMBtu or falls below 900 MMBtu.

This functionality ensures accurate accounting, prevents imbalances, and maintains fair settlements between the marketer and the end user.

Cash out types

Cash out type Description Pricing options Effect on invoice
Long Triggered when the end user consumes more than the contracted volume. Fixed or indexed Added to total invoice amount
Short Triggered when the end user consumes less than the contracted volume. Fixed or indexed Deducted from total invoice amount

Swing tolerance

The Swing setting acts as a tolerance limit around the contractual volume. It defines a percentage threshold within which cash outs will not be applied.

Example

If the contracted volume is 1000 MMBtu and the swing tolerance is set to 10%:

  • Cash outs will only be applied when usage exceeds 1100 MMBtu (over) or falls below 900 MMBtu (under).
  • Any usage between 900–1100 MMBtu is considered within tolerance and no cash out applies.

Swing tolerance helps avoid frequent minor adjustments due to small usage variations.

Calculation logic

Long (over) cash outs

When actual consumption > contracted volume:

  1. Identify the overused volume for the period.
  2. Retrieve the cash out charge (fixed or index-based + markup).
  3. Calculate daily cash out charge: Daily cash out = Overused Volume × (Indexed Price + Markup)
  4. Calculate Monthly Weighted Average Cost of Gas (WACOG): WACOG = Total cash out Value / Total Overused Volume
  5. Apply total over cash out to invoice as an additional charge.

Short (under) cash outs

When actual consumption < contracted volume:

  1. Identify the underused volume for the period.
  2. Retrieve the cash out charge (fixed or index-based + markup).
  3. Calculate daily deduction: Daily cash out = Underused Volume × (Indexed Price + Markup)
  4. Calculate WACOG for underused volume: WACOG = Total Short cash out Value / Total Underused Volume
  5. Apply total short cash out to invoice as a deduction.

Example scenario

Contracted volume: 1000 MMBtu Swing tolerance: 10% Actual usage: 1150 MMBtu Overused volume: 150 MMBtu Indexed price: HSC + 0.34

  • Over cash out applies since usage exceeded swing limit (1100 MMBtu).

  • Suppose the HSC index price on a given day is 2.30.

    • Effective rate = 2.30 + 0.34 = 2.64
    • Daily over cash out = 150 × 2.64 = 396.00 USD

  • The system records this as a line item in the invoice under Over cash outs.

Invoice integration

When invoices are generated, two separate line items appear for cash outs:

  • Over cash outs (purchases): Added to the total payable amount.
  • Under cash outs (sellbacks): Displayed as a negative value and deducted from the total payable amount.

This ensures accurate financial reconciliation between actual usage and contracted commitments.

Best practices

  • Regularly review index pricing updates to ensure accurate cash out computations.
  • Define reasonable swing tolerance values to prevent excessive billing fluctuations.
  • Validate WACOG calculations monthly to maintain billing accuracy.
  • Ensure markup configurations align with internal financial policies.