Retail Contracts
Overview
Introduction
This project took a broad view of the issues of importance to consumers through a principles-based approach. The objective of the work was to create a platform for moving forward on addressing consumer issues in the gas sector, either by presenting options for solutions where the existing work platform justifies this, or in other cases, setting out issues for further consideration – either by Gas Industry Co where consideration is within the mandate of the Company, or by other organisations. The project especially built on work previously carried out on retail model contracts, connections and disconnections, and assessing the performance of gas markets.
Summary of Status
A Consumer Issues consultation paper was issued in August 2008. Submissions were analysed and proposed design for the oversight of retail contracts developed. Following consultation, a voluntary scheme was recommended to the Associate Minister, which she endorsed on 12 May 2010. A baseline assessment is being conducted and results will be published by September 2010.
Contact Details
Greig Hinds
Tel: 04 472 1800
greig [dot] hinds
gasindustry [dot] co [dot] nz
Issues, Options and Discussion Papers
Previously Consulted On
Proposed design for the oversight of voluntary implementation of retail contract benchmarks
The response and analysis of the submissions document published on 29 January 2010 foreshadowed the publication of a full proposed design for the oversight of the voluntary implementation of retail contract benchmarks. The design consultation document can be viewed below.
Following an industry workshop and discussion with other interested stakeholders, the design was finalised and presented to the Associate Minister of Energy and Resources for consideration of endorsement. Implementation is expected to be no later than mid 2010.
Options for the Governance of Retail Contract Terms - Consultation Paper
Building on previous work on model contract guidelines and work done in conjunction with the Electricity Commission and the Electricity & Gas Complaints Commission, this paper presented a set of benchmark, or minimum, contract terms for governing domestic and small consumer gas supply arrangements. The two options are: voluntary adoption of the benchmark terms, or regulated implementation of the minimum terms.
Submissions received
Discussion Paper – Current Issues for Domestic and Small Business Gas Consumers
This discussion paper was a review of the approach to dealing with consumer issues in selected overseas jurisdictions and in New Zealand, and provided an account of the work to date by Gas Industry Co in this area. It adopted a principles-based approach to future work needs by establishing a set of consumer expectations, and analysing the shortfalls in meeting those expectations through current industry practice and gas governance arrangements. The analysis was based on a defined policy framework. The discussion paper set out conclusions on meeting these unsatisfied needs, and the extent to which the required work fell within the mandate of Gas Industry Co to action. The discussion paper particularly addressed the need for work on retail contractual terms and conditions. The discussion paper was released in both short (summary) and full form.
Submissions received
Options for Consumer Contract Arrangements
The purpose of this consultation paper was to seek input from stakeholders on the Model Contracts Working Group’s draft model contract guidelines, the options for giving effect to the guidelines from a governance and compliance perspective, and Gas Industry Co’s recommended option.
Submissions received
Analysis of Submissions and Response to the Options for the Governance of Retail Contract Terms consultation paper dated 5 October 2009
This paper provided an analysis of submissions on the retail contracts consultation paper referred to below, and the Gas Industry Co response to the submissions. The list of submitters is set out below. Input was also received from the Consumer Forum held on 16 October 2009.
Response to Analysis of Submissions on the Consumer Issues Consultation paper dated 18 August 2008
In August 2008, a consultation paper was published inviting submissions on a range of current issues for domestic and small business gas consumers. Submissions were analysed and a response formulated that reached conclusions and set out the proposed next steps in key areas. The key areas are those of gas market and gas governance performance measurement, the provision of information to support consumer choices, dealing with connections and disconnections, and achieving appropriate retail contract terms and conditions. The response also included a final set of 18 proposed ‘consumer expectations’.
Response to Analysis of Submissions on the Consumer Issues Consultation paper dated 18 August 2008
Recommendation to the Associate Minister of Energy and Resources on the endorsement of arrangements for the oversight of gas retail contracts
At its 22 March 2010 meeting, the Board of Gas Industry Co agreed to submit a recommendation to the Associate Minister regarding retail contracts. The Recommendation sought endorsement for an industry-led arrangement of benchmark terms. The Recommendation was sent to the Minister on 29 March 2010. The Associate Minister's respone can be found under the 'Implementation' tab.
Implementation
In March 2010, Gas Industry Co submitted a recommendation to the Associate Minister of Energy and Resources that a retail contracts oversight scheme be established. On 12 May 2010, the Associate Minister advised her support for the retail contracts oversight scheme, and noted that she looked forward to receiving the assessments of industry alignment.
View 12 May letter from Associate Minister
There, we set out the process for conducting the baseline assessment and provide information about the steps required by Gas Industry Co, the independent assessor, and retailers.
Assessment overview
Using a set of outcome-based benchmarks, developed in consultation with the industry, an independent assessor will review retail gas contracts to determine their alignment with industry best practice.
Gas Industry Co has appointed Elwood Law Limited as the independent assessor. The principals of Elwood Law are lawyers who are skilled at interpreting contractual arrangements, and who have a great deal of experience with the gas industry. They are very conversant with the benchmark terms, having undertaken the contract assessment for the October 2009 consultation paper.
Baseline assessment
According to the recommendation, the first step in implementing this oversight scheme is to conduct a ‘baseline assessment’ of existing gas supply arrangements. The term ‘gas supply arrangements’ covers the published standard terms for gas retail supply contracts (whether residential or business), along with all ancillary documentation referenced in those contracts. The documents that are proposed to be reviewed by Elwood Law will be circulated to each retailer.
Where necessary, Gas Industry Co will provide Elwood Law with guidance as to the interpretation of the benchmark terms. Any guidance given will be included in the assessment reports.
Individual retailers will receive the baseline assessment results for their own contractual arrangements and they will be given an opportunity to comment on those draft reports before receiving final versions. None of the individual retailer reports will be published by Gas Industry Co. It is expected that these reports will help individual retailers better align their contracts with the benchmarks.
A consolidated report for the whole industry will then be submitted to the Associate Minister and published.
The timeline for implementing the baseline assessments is as follows:
|
Date (2010)
|
Activity
|
Responsible party
|
|
27 May |
Retailer Forum advised of Associate Minister’s approval of oversight scheme |
Gas Industry Co |
|
Week of 31 May |
Letter to retailers advising of scheme and scheme requirements (including request for documentation) |
Gas Industry Co |
|
9 June |
Date for supply of further documentation |
Retailers |
|
15 June |
Documents accessed and downloaded |
Elwood Law |
|
15 June – 7 July |
Assessment |
Elwood Law |
|
12 July |
Draft individual assessments circulated to retailers for comment |
Elwood Law / Gas Industry Co |
|
23 July |
Response to draft assessment due back from retailers |
Retailers |
|
4 August |
Final individual and consolidated assessments provided to Gas Industry Co |
Elwood Law |
|
12 August |
Board considers consolidated assessment |
Gas Industry Co Board |
|
By 31 August |
Consolidated assessment sent to Associate Minister and published |
Gas Industry Co |
Next steps
For the purpose of the baseline assessments, as soon as possible and no later than 9 June 2010, Retailers are asked to:
• confirm whether the relevant table of documents for review (supplied to each retailer) is a complete and accurate description of all of their gas supply arrangements;
• provide any missing details of their gas supply arrangements, including internet links to documents available on their website;
• provide electronic copies of any documents that are part of their gas supply arrangements but which are not available on their website; and
• advise if any documents in the table will be amended before 15 June 2010.
[Note: providing this information is voluntary, but assessments will be made based on information available to the assessor].
Gas Industry Co is aware of the need to keep the burden of compliance activity to a minimum. As such, we are seeking to align the timing and ultimate objectives of our retail contract oversight with that of the Electricity Commission.
Subsequent assessments
The next assessment is scheduled to take place on or about 15 June 2011 (‘transitional’ assessment). Again, only the consolidated assessment for that review will be published.
If you have any questions about the scheme or this process, please do not hesitate to contact Greig Hinds at Gas Industry Co:
Phone: 04 494 6583
E-mail: greig [dot] hindsgasindustry [dot] co [dot] nz