Overview

Retailer Insolvency establishes a process that Gas Industry Co will follow in the event of a retailer insolvency and the regulatory arrangements that can be put in place to support that process.

Gas Industry Co has 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.

Gas Industry Co consulted on arrangements that would see it 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; and
    • activating those regulations; and
  • cleaning-up after the event.

Because any regulations would be made under urgency, there would also be a requirement to consult retrospectively on those regulations.

This work programme came about as a result of the Gas Governance (Insolvent Retailers) Regulations 2010, which were created by the then Ministry of Economic Development using the urgent regulation-making provisions of the Gas Act (section 43P).

Gas Industry Co consulted retrospectively on those Regulations in March-April 2011. The outcome was a recommendation by Gas Industry Co 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

  • Insolvent Retailers Drafting Instructions
    129 KB Adobe Acrobat PDF file

Background

Gas Industry Co consulted on the Gas Governance (Insolvent Retailers) Regulations 2010, which were created using the urgent regulation-making provisions of the Gas Act (section 43P), in March-April 2011. The outcome was a recommendation by Gas Industry Co to the Minister of Energy and Resources (the Minister) 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.

The Minister accepted the recommendation and, as a first step for that work, Gas Industry Co engaged Castalia Strategic Advisors (Castalia) to prepare a discussion paper on whether there were any identifiable market failures that warrant 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.

The next step was the publication of an Options Paper, which presented various options for addressing the market failures identified in the Castalia Report. The Options Paper is available under the 'Policy Development - Options Paper' section.

On 27 May 2015, Gas Industry Co published a Final Decision Paper Framework for Gas Retailer Insolvency ArrangementsIt sets out the process that Gas Industry Co 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.  Gas Industry Co anticipates that any further 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

  • Final Decision Paper - Framework for Gas Retailer Insolvency Arrangements - May 2015
    229 KB Adobe Acrobat PDF file
  • Insolvent Retailers Drafting Instructions
    129 KB Adobe Acrobat PDF file

On 18 October 2010, the E-Gas group of companies went into liquidation. At the request of the Minister of Energy and Resources, Gas Industry Co assisted the then Ministry of Economic Development (MED) and Parliamentary Counsel Office (PCO) to prepare the Gas Governance (Insolvent Retailers) Regulations 2010.

In May 2011, Gas Industry Co 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, Gas Industry Co 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.

Related Information

Statement of Proposal (March 2011)

Related Documents

  • Regulations - Gas Governance (Insolvent Retailers) Regulations 2010
    353 KB Adobe Acrobat PDF file
  • Recommendation to the Minister on arrangements for insolvent retailers - May 2011
    324 KB Adobe Acrobat PDF file

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