Comtrac Walk-through

The following example walks you through the life-cycle of a shipment of coal - from contract creation to recording accounting transactions. The following scenario is used:

“Abacus Coal” is a new coal supplier supplying low sulfur coal to the “Addison” generating station owned by “Advance Energy.” A transportation agreement is entered into with “Acton Rail” to move the coal from “AAA Mine” to Addison station. A train ("TR 1234") is received, unloaded and distributed to the unit 1 bunker at Addison. Addison and the supplier analyze the samples of coal - both analyses are recorded. The coal distributed to Unit 1 is recorded as an inventory transaction. Accounting transactions are generated to record the coal cost and pay the supplier and carrier. Consumption costs are generated to reflect the cost of coal burned. Journal Entries are created to update the corporate General Ledger system. The supplier, station, Energy Company, and mine are new and require creation - see the Administration process.

General Features:

General Features:

Tree-View: Presented in a familiar tree-view style with object nodes in the left pane and detail presented in the right. Some modules allow you to define how the tree-view is displayed through a "View" option. You can also set defaults to preserve the view desired.

Browser Interface: Multiple Browser sessions can be opened at one time – for example, you can run a shipment session next to Quality. You can also resize the window to fit your needs.

Security: You can change your password from the “File” menu item from any module. You will be presented only those modules (e.g. Shipment) that you have authority to access. Only authorized functions within a module will be available.

Help: Available from each module through the Help menu option. Help includes a detailed explanation of all processes available in ComTrac.

Multiple Fuel Types: Each module has the capability to track activity by fuel type. For example, you may have shipments under coal, fuel oil and limestone. Each fuel type will show all suppliers, since some suppliers may handle more than one type of fuel.

Sortable Columns: Columns in the detail pane and in most list boxes are sortable through a click on the column heading.

Export to Excel: Allows the “Detail” view to be exported to an Excel spreadsheet for further analysis (see Appendix A of this document).

Primary Processes:

Contract:

ComTrac provides the ability to track coal, fuel oil, lime, limestone, propane, natural gas, and transportation contracts. Contract related information maintained, includes: General terms, commodity description, commodity characteristics (e.g. sulfur content of coal), prices, and pricing formulas. The text of the agreement is not maintained.

Each contract may include multiple commodities within a fuel type. All quality and pricing is maintained at a commodity level. Each commodity may have multiple quality characteristics (e.g. sulfur, moisture, ash), with the ability to change the characteristic value over time. Each commodity may also include multiple price components. A price component may be a base price, pricing formula, a formula component or a value representing different types of pricing (e.g. index pricing, volume pricing, refund, flat rate, etc.).

Commodity Contract - Tree-View: The tree-view displays fuel types (coal, fuel oil, etc.), suppliers and contracts. The detail pane displays detail data stored related to the information category selected (General Terms in this example).

Commodity Contract - General Terms: Allows you to enter information related to the coal agreement. The "Payment" information relates to how price adjustments are calculated through the Recap report - see Commodity Contract Components, for an explanation.

Commodity Contract - Commodity: This process allows you to create one or more commodities purchased from the supplier. The commodity is identified by a name and is used throughout the system. The f.o.b. location is identified for each commodity as well as a Purchase Order Number. A commodity will have associated quality characteristics and price components; and is tied to any shipments received under this contract.

The Governing Party for weights, samples and analysis are also assigned. The assignment of the governing party determines whose weights will be used to determine payment and whose analysis will be used if quality price adjustments are required.

A commodity will have associated quality characteristics and price components; and is tied to any shipments received under this contract.

Commodity Contract - Quality: Each commodity may have characteristics (e.g. sulfur), or characteristic penalties (e.g. sulfur penalty) defined. The characteristics and penalties are used in determining the final price paid to the supplier. The actual characteristic value is compared to the contract value (above) and used in pricing formulas for certain contracts.

Commodity Contract -Pricing: Each commodity is priced and may be assigned a price adjustment formula. Pricing formulas are generally established for coal contracts and are used in determining any price adjustments based on the quality of the fuel received compared to the contract specification (entered in Quality tab).

There are approximately 60 formulas already established in the system and can be selected as required. Variables in the formulas match to some contract components (e.g. sulfur specification or base price). There is also the ability to create new formulas in the Formula Builder component of the system (see below).

Commodity Contract - Formula Builder: If a formula is not currently supported, you can build complex price adjustment formulas as required, through the "Formula Builder." The Variables, displayed above, are specified in the contract quality specifications. Note: This formula is not associated with the example presented.

Transportation Contract:

A Transportation contract defines a service performed by a carrier to transport a commodity for one or more specified route segments (origin/destination). Multiple rates may be maintained for each route segment based on effective date. Note: This process assumes that a carrier (vendor), mine, and origin and destination location points have been set up ("Admin" module).

Transportation Contract: The tree-view displays all Carriers defined in Comtrac with their associated contracts. The Detail Pane displays selected sections of the contract.

Transportation - General Terms: Identifies the contract name and ID, defines the contract duration, assigns a status (currently “Approved” or “Completed”), and indicates if the carrier has authorized payment through self-invoicing (see Accounting).

Transportation - Route Segment: A location origin and destination define a route segment. The location origin “AAA Mine,” was previously set up as a mine and location (see Administration, below). The route segment is created in the carrier contract simply by selecting an origin and destination combination – this is the route serviced by the carrier. The route will be assigned to a shipment to establish a freight cost.

Transportation - Route Pricing: Multiple prices can be tracked over time for each route segment.

Shipment:

A shipment represents a quantity of fuel (coal, fuel oil, lime, etc.) shipped by a supplier to a destination in accordance with contract requirements. The shipment is assigned to a contracted fuel commodity for pricing and quality specifications. Each shipment is assigned a route segment that is defined in a carrier contract. A shipment can be defined as a single train, a single barge, or a group of trucks for a given day. The shipment can go through a life-cycle consisting of “Shipped,” “Arrived,” “Partially Unloaded,” and “Unloaded.” Shipments can be created manually through the system or automatically through an electronic interface with a carrier.

Shipment Tree-View: View by supplier, by contract (above); or by Company, by station.

Shipment - General: The shipment is assigned to a commodity and identified (along with the ship date) to the system, through the “Transportation Unit” number.

Shipment - Detail: The shipment and arrival date are set along with the tons on the shipment as measured by the supplier. If the governing weight party is “Seller,” then these tons become the weight of record for the shipment.

Shipment - Route: The selected route must be defined to a transportation contract in order for it to be displayed as an option. The route segment for the applicable carrier contract is selected for the shipment - this assigns the correct freight cost to the shipment.

Shipment - Distribution: The Distribution process allows you to enter the tons unloaded to any of the designated storage locations for the Station. It determines, based on the contracted governing party, the total weight-of-record (payment weight) for the shipment. If for example, the governing party is "Seller," the actual distributed weight is allocated to the storage location based on the distribution’s ratio to the total distributed, times the supplier's weight. In this example, the governing weight party is "Station" - the distribution weight is the payment weight.

Quality

An analysis can be recorded for any type of test required on a fuel commodity. Each type of analysis has a set of analysis characteristics defined. When you select the analysis type, the appropriate analysis characteristics are displayed and you may then enter the values.

Multiple analyses can be assigned to a shipment or distributions for a shipment. For example, you can record supplier and generating station analysis; you can record separate analysis for a distribution to a generating unit and to a coal pile. Comtrac can automatically update quality analysis via an electronic interface with a station or outside laboratory.

Quality Tree-View: View by commodity type (coal), company (Advance), and station (Addison). The shipment, sample, and analysis is displayed under the station. In this example, the station and supplier analyzed the sample. The recorded analysis is displayed in the right pane.

Quality – Select Distribution / Record Sample: An analysis can be recorded for all distributions or for an individual distribution. Information about the sample is entered and then the analysis recorded.

Quality - Record Analysis: The analysis facility should default to the "Source" of the sample from the previous screen. If the analysis facility is the governing analysis party, the “Payment” check box is checked. The analysis is entered in the value field for each unique characteristic. If “as received” values are entered, the “Dry” values are automatically calculated.

Note: The above analysis type is "Short-Proximate." Other analysis types can be defined and used as required.

Inventory:

This process maintains transactions (receipts, consumptions, reclaims, adjustments, and transfers) that affect the operational inventory level of a storage location. The Inventory module allows the manual entry of consumption, reclamations, adjustments, and transfers from other outside locations. Month-end inventory levels are retained for each storage location. The effect of distributing and unloading the shipment results in a shipment receipt and consumption to be displayed in the Inventory module.

Inventory View: This “Hierarchy” view displays all activity that determines the inventory level for a specific storage location. This storage location is defined to ComTrac as a location that automatically consumes what is distributed (see maintenance of "Station"). A manual consumption location will not have the off-setting consumption recorded – but is recorded manually through the Inventory module as a “Consumption.”

Note: The Beginning Inventory is set up when the Storage Location is created for the Station.

Inventory Adjustment: Record any adjustments to the inventory level at any storage location.

Inventory Reclamation: Record movement of coal from pile to bunker.

Inventory Consumption Transactions: For stations that record consumption from equipment readings, a manual consumption transaction process is available. Most stations assume that what is distributed to a unit is consumed (as in the example).

Accounting:

Accounting provides the ability to process and record the payment of a commodity or transportation service. It also determines accounting inventory values, generates supporting transactions, rolls up transactions to General Journal entries for monthly closing, and calculates joint owner share of fuel costs. Accounting also creates a file from the journal entries to the corporate accounting G/L system. It allows you to generate transactions by company, fuel type, vendor, station, commodity, and time period.

There are two primary processes around Accounting: Generate Purchase Cost and Generate Fuels Accounting. The Purchase Cost process is concerned primarily with generating and recording payment to suppliers during the month of receipt according to contract terms - e.g. payment for the base cost of all coal shipments unloaded within the first 15 days of the month. Generate Fuels Accounting focus is on recording or correcting all commodity related transactions that occurred in the prior month to enable accounting to "close" for the month - this may include changing prior transactions if warranted and creating journal entries to group transactions for updating General Ledger.

Generate Purchase Cost:

Generate Transportation Cost: This process records the transportation cost liability associated with a commodity shipment. The transaction will credit a carrier liability account (payable) and debit (increase) the inventory value of fuel by the transportation cost (rate times quantity).

Accounting - Transportation Transactions: In this example, the freight cost of $3.56/ton is multiplied by the payment weight (9,002) to arrive at the $32,047.12 freight cost. The tree-view is the "Utility Company Location - Transaction" view. The highlighted transaction is made up of an Inventory and Payable entry. A Transportation Cost report is generated and forwarded to the carrier.

Accounting - Transportation Payment Voucher: If the vendor is set up for automatic invoicing, a Payment Voucher is created. The issued payment voucher is forwarded to Accounts Payable for payment. The tree-view is the "Vendor/Payment Voucher - Transaction" option.

Generate Base Cost:

Creates the initial liability to the vendor for selected shipments. It generates transactions to record a fuel liability (payable - credit) and an associated inventory transaction (debit); for the base cost times the weight of record. This process sets the stage to issue a Payment Voucher for the initial payment for the month to the coal vendor. It also generates a confirmation (Base Cost) report.

Accounting - Base Cost Transactions: In this example, the base cost of $22.00/ton is multiplied by the payment weight (9,002) to arrive at the $198,044 base cost. The tree-view display is the "Transaction" view by utility company/ location. The base cost (Receipt) transaction is made up of an Inventory and Payable entry.

Accounting - Base Cost Payment Voucher: A Payment Voucher is generated if the contract is set up as self-invoicing. The payment voucher authorizes payment to the supplier for the base cost of the coal. This initial amount paid to the supplier is also reflected on the Recap report as the “Total Paid Amount.” The payment voucher is issued (printed) and sent to Accounts Payable for processing.

Generate Base and Adjustment Costs:

This process initiates the Recap report to determine the final payment to the supplier and generates required transactions. It may re-calculate the final payment amount if there has been a price or weight change. The following activities are initiated:

Records a liability (Payable) for the base cost of the commodity and adjusts fuel inventory accordingly.

Records the MBTU (millions of BTUs) received from shipments not included in the Base Cost process.

Records any Penalty/Premium price adjustment transactions for each shipment and for each characteristic (e.g. sulfur) formula triggered. The sulfur adjustment triggered formula 26, defined in the contract price component screen.

If the Self Invoice indicator in the related contract is set to “Yes,” a Payment Voucher is automatically created.

Accounting - Penalty/Premium transaction generated: The $10,820.40 is calculated from the Recap report (below).

Accounting - Recap Report: Identifies the shipment(s) unloaded, analyzed quality of the commodity (coal) received, penalty/premium adjustments, contract guarantees, and calculates the total cost. The sulfur penalty (formula 26) generated a penalty of $1.202/ton for a total of $10,820.40. The "Total Paid" amount was paid as a part of the Payment Voucher created in the month of the shipment. The supplier, in this example, owes Advance Energy for the amount of the sulfur penalty.

Generate Consumption Costs:

Generates transactions to reflect the quantity and value of fuel consumed. The value is determined by a weighted average cost of available inventory. This weighted average cost (WACI) is multiplied times the tons for shipment distributions, manual consumptions, reclaims, and adjustments to bunkers; to arrive at a consumption cost. A debit is made to a consumption expense account and a credit to inventory.

Accounting - Generate Consumption: This is a view by Location and Inventory Balance of the consumption expense generated (21.29 x 9002 = $191,652.58). The "Purchase Cost" is a combination of the base cost ($198,044) and the penalty adjustment (-$10,820.40).