Wholesale Market
Overview
Introduction
The current Government Policy Statement on Gas Governance invites Gas Industry Co to recommend efficient arrangements for the short-term trading of gas. It is expected that Gas Industry Co will develop protocols and standards applying to wholesale gas trading, including quality standards, balancing and reconciliation.
With these objectives in mind, Gas Industry Co is working towards the establishment of a trading hub, at which short-term quantities of gas can be bought and sold, based on a platform bilateral approach. Particular issues that are being addressed include the location of the hub, the governance of the trading market and its participants, and how the market will be integrated with existing practices.
Following the implementation and evaluation of a market trial, Gas Industry Co will provide a recommendation for the future of the platform-based market.
Summary of Status
Three discussion papers on the concept and design of the wholesale market were prepared and released in March, September and December 2006. Analysis of submissions on these papers highlighted a suitable way forward and following an interim recommendation to the Minister of Energy in December 2006, Gas Industry Co progressed with the publication of a standard short-term trading contract in April 2007 and the development of a functional specification for a simple matching platform.
In August 2007 M-Co was selected as the service provider for the trading platform and it was decided that a market trial would be the best way to proceed. Governance documents for trading on the market were prepared in 2008 as well as development of the operational aspects of the market in order for the market trial to go ahead in 2009.
Contact Details
gasindustry [dot] co [dot] nz
Discussion Papers and Presentations
Previously Consulted On
Discussion Paper - Gas Wholesale Market Design
Following receipt of submissions on its September discussion paper on Wholesale Market Design, Gas Industry Co has issued a further discussion paper which reports on the analysis of the submissions, provides Gas Industry Co's view on the issues raised and requests further input on a specific range of matters. This work stream is now focused on advancing the preparation of a standard gas sales agreement for shorter-term trades and investigating the feasibility of a matching platform as a basis for low-cost, electronic trading. Each of these initiatives is aimed at increasing transactional efficiency in gas trading.
Submissions received
Discussion Paper - Wholesale Market Design
This discussion paper builds on the feedback received from stakeholders earlier in the year. Gas Industry Co has undertaken both quantitative and qualitative analyses of options for development of a wholesale market and this discussion paper recommends a modular approach to implementation. In the first instance, it is proposed to issue a standard gas trading agreement as a means to achieving common standards for gas trading and to reduce transaction costs for market participants. The paper also recommends that a simple matching platform could be put in place for modest cost and would be expected to achieve additional transactional efficiencies. Gas Industry Co will take into account feedback received on the paper when undertaking the detailed design of wholesale market arrangements.
Submissions received
Discussion Paper - Concept Design for Wholesale Gas Market
This discussion paper gives stakeholders the opportunity to review and comment on options for a wholesale gas market in New Zealand. A series of options are described at a conceptual level and evaluated according to criteria agreed between Gas Industry Co and the Wholesale Market Working Group. Submissions on this document will be used to assist in selecting an option for further development. The supplementary note addresses Section 41 of the Crown Minerals Act 1991, which may or may not have an effect on the design of the wholesale market.
Submissions received
Presentation - Wholesale Gas Market Design Industry Workshop
This presentation gives an introduction to the policy framework and conceptual issues for a wholesale gas market. It looks at the size, structure and characteristics of the New Zealand gas market in relation to other international markets and presents some high-level options available for the operation and governance of a trading market.
Establishment
Previously Consulted On
Presentation: Wholesale Market Hub Options
Date Published: 26 February 2008
This presentation provides a status report on the development of the wholesale market with particular focus on the options and motivation for locating trading at a hub. Two options are proposed: a virtual hub and a trading hub. The advantages, disadvantages and operational aspects of each option are explored and the conclusion is drawn that the trading hub option provides the best long-term solution.
Wholesale Market
Trading system operator
Service provider agreement
Gas Industry Co entered into a service provider agreement with M-co in 2008 for provision of a trading system. That agreement was novated to NZX in 2009 when NZX purchased the business assets of M-co.
The service provider agreement can be viewed here.
Wholesale Market governance documents
There are four interlinked documents that govern the operation of the New Zealand Gas Exchange:
Rules of the New Zealand Gas Exchange
Participant Variance Agreement
Related Documents:
- Determinations Document This document contains various parameters governing the operation of the New Zealand Gas Exchange (as required by the Rules) and the process by which participants will be cashed-out for any imbalances they create at the Trading Hub (as required by the Participant Variance Agreement).
- Guidelines on Adjusting Net TQ This document sets out principles by which Gas Industry Co will calculate Net Traded Quantities and cash-outs in the event of a curtailment at the Trading Hub, as required by the Participant Variance Agreement.
- How to Trade on the New Zealand Gas Exchange This document is a users' guide to the New Zealand Gas Exchange and includes references to the relevant trading rules.
Application Process
Entities wishing to join the market must apply using the form below and must supply all requested information.
- Determine the effective date of admission (which, under the Rules, will be not less than 5 days from the date of notice);
- Advise the Trading System Operator, so that an account for the applicant can be created; and
- Request MDL to include the Trading Hub Delivery and Receipt points in the applicant’s Transmission Services Agreement.
Standard Trading Contract
Date Published: April 2007
Author: Gas Industry Co
Following extensive consultation with gas industry participants, it was suggested that Gas Industry Co take a staged approach to development of a wholesale gas trading market, the first step being to develop a standard gas sale contract for use in short term, direct-bilateral trades.
Gas Industry Co, in conjunction with industry participants, has developed a standard gas sales contract which is available free of charge for use by industry participants. Please click on the following links to view the GSA and Standard Terms:
The standard contract comes in two parts:
- A Gas Supply Agreement in which the parties specify the variable terms of trade; and
- A schedule of the standard, non-variable terms of trade.
As the standard contract is designed for trading on both the Maui and Vector systems, arrangements for the transportation of gas are dealt with outside of the standard contract. The standard contract provides for the non-exclusive trading of gas and therefore does not contain any restrictions on the on-sale of gas to third parties.
Gas Industry Co has developed a basic user guide to assist with use of the standard contract. Please click on the following link to view the user guide: