Explore this Work Programme:
Overview
Retailer insolvency establishes a process that we will follow in the event of a retailer insolvency and the regulatory arrangements that can be put in place to support that process.
We have previously determined that a gas retailer becoming insolvent will only lead to a market failure in limited circumstances, as normal insolvency processes should be sufficient to produce acceptable outcomes in most cases.
Accordingly, there is no need for permanent backstop regulation such as a retailer of last resort scheme.
What we consulted on
We consulted on arrangements that would see us managing a specific retailer insolvency by:
- monitoring the progress of any retailer insolvency
- where necessary:
- tailoring pre-existing drafting instructions to the situation
- making a recommendation for urgent regulations
- activating those regulations and
- cleaning up after the event.
As any regulations would be made under urgency, we would also need to consult retrospectively on those regulations.
How this work programme came about
This work programme came about as a result of the Gas Governance (Insolvent Retailers) Regulations 2010.
These regulations were created by the then Ministry of Economic Development using the urgent regulation-making provisions of the Gas Act (section 43P).
We consulted retrospectively on those regulations in March-April 2011.
As a result, we made a recommendation to the Minister of Energy and Resources that the regulations be allowed to lapse, and consideration be given to whether a generic regulatory solution was required to address retailer insolvency.
Related documents
Background
Gas Governance (Insolvent Retailers) Regulations 2010
We consulted on the Gas Governance (Insolvent Retailers) Regulations 2010.
The regulations were created using the urgent regulation-making provisions of the Gas Act (section 43P) in March-April 2011.
The outcome was that we made a recommendation to the Minister of Energy and Resources that the regulations be allowed to lapse, and consideration be given to whether a generic regulatory solution was required to address retailer insolvency.
This work, including the consultation paper, the submissions received, and the Recommendation to the Minister can be found in the E-Gas Insolvency (2010-2011) section below.
Discussion paper to identify if regulatory intervention warranted
The Minister accepted the recommendation and, as a first step for that work, we engaged Castalia Strategic Advisors (Castalia) to prepare a discussion paper on whether there were any identifiable market failures that warranted regulatory intervention in the event of gas retailer insolvencies.
The discussion paper and the submissions received on it are available under the 'Policy Development - Discussion Paper' section below.
Options to address market failure
We next published an Options Paper presenting various options for addressing the market failures identified in the Castalia Report.
The Options Paper is available under the 'Policy Development - Options Paper' section.
Final Decision Paper
On 27 May 2015, we published a Final Decision Paper Framework for Gas Retailer Insolvency Arrangements.
Final Decision Paper Framework for Gas Retailer Insolvency Arrangements
It sets out the process that we will follow in the event of a retailer insolvency and the regulatory arrangements that can be put in place to support that process.
The Final Decision Paper completes the policy development process for this workstream.
Next steps
We anticipate that any more policy work will be limited to reviews of the Insolvency Framework from time to time to ensure that it remains current.
Key areas
The Final Decision Paper - Framework for Gas Retailer Insolvency Arrangements published on 27 May 2015 followed consultation with industry participants and completes the policy development process for this work stream.
The Paper:
- responds to submissions received regarding the drafting instructions
- provides a template for drafting instructions that can be tailored to the specific circumstances of a retailer insolvency; and
- sets out the steps that Gas Industry Co will take should a retailer insolvency occur, including steps that have been enabled by amendments to the Gas (Switching Arrangements) Rules 2008 and the Gas (Downstream Reconciliation) Rules 2008.
Related documents
On 18 October 2010, the E-Gas group of companies went into liquidation. At the request of the Minister of Energy and Resources, we helped the then Ministry of Economic Development (MED) and Parliamentary Counsel Office (PCO) to prepare the Gas Governance (Insolvent Retailers) Regulations 2010.
In May 2011, we recommended to the then Acting Minister of Energy and Resources (Minister) that the Regulations be revoked by the operation of regulation 19, and for Gas Industry Co to consider whether a generic regulatory solution was required to address retailer insolvency, and if so, we would develop the form of that solution.
The Gas Governance (Insolvent Retailers) Regulations 2010 and the Recommendation to the Minister on arrangements for insolvent retailers can be found below.