On 13 February 2018, Gas Industry Co released a paper containing its preliminary assessment of First Gas’s proposed Gas Transmission Access Code (GTAC) (Preliminary Assessment Paper (PAP)).
On 8 December 2017 First Gas submitted its proposed GTAC to Gas Industry Co for analysis and comparative evaluation. Gas Industry Co is tasked, under the provisions of the current Maui Pipeline Operating Code (MPOC), with preparing a comparative evaluation of the proposed GTAC against the existing arrangements (MPOC and the Vector Transmission Code (VTC)). In making that evaluation, Gas Industry Co must determine whether the GTAC is “materially better’’ than the MPOC and the VTC when assessed against the objectives in s43ZN of the Gas Act 1992 and the objectives and outcomes set for Gas Industry Co in the Government Policy Statement on Gas Governance dated April 2008 (GPS).
The process of developing the proposed GTAC has been comprehensive and inclusive involving a series of formal consultations, workshops and industry meetings which have included both conceptual papers as well as progressive drafts of the GTAC. These have contributed to the debate and have ensured that First Gas is aware of stakeholders’ thinking and that stakeholders have also had extensive opportunity to ask questions on matters of interest or concern.
Gas Industry Co considers that the level of participation in the process to date is not only an indication of how important the subject matter is to stakeholders, but also demonstrates stakeholders’ willingness to assist in the creation of a better single transmission code. It is worth noting that, based on the many changes that have been made to the GTAC in the process of formal consultations and workshops, First Gas has been responsive to much of the feedback.
A number of aspects of the GTAC regime offer substantial improvements over the existing MPOC and VTC arrangements. Indeed, there is a lot to like about the proposed GTAC and that has been reflected in many of the submissions that Gas Industry Co has received on it. However, the “materially better” standard set by the MPOC is a high threshold that requires the GTAC, as a whole, to provide a significant improvement compared with the status quo.
Gas Industry Co’s preliminary assessment of the GTAC is that the level of improvement does not achieve the standard of being materially better. This conclusion is strongly influenced by the following specific concerns:
- The transport incentive charge structure in non-congested situations appears likely to encourage inefficient behaviour by pipeline users– detracting from the efficiency improvement that would otherwise occur.
- Aspects of the liability provisions are less certain in their effectiveness, undermining the incentives on pipeline users to act prudently – detracting from the efficiency and reliability benefits of the GTAC. Even if the liability arrangements are effective, we would also question whether the new arrangements (and the reallocation of risk) are an improvement on the MPOC and the VTC.
- Interconnected Parties and Shippers do not have sufficient certainty regarding the terms of interconnection agreements. This is detrimental to efficiency and fairness.
- The Park and Loan service terms may appreciably skew First Gas’s incentives, if Park and Loan fees are outside the Part 4 revenue cap. This would be detrimental to efficiency.
Presentation from workshop held 1 March 2018
The PAP was presented at a workshop held on Thursday 1 March 2018. Towards the end of this session, First Gas provided its initial views on the preliminary assessment and possible next steps. Both presentations are available below. At the afternoon session on 1 March 2018, First Gas also presented on Transmission Security and Reliability. That presentation can be found here. The full PAP can be found below in Related Documents.
Further information on the GTAC work programme is found here.
NEXT STEPS
While Gas Industry Co considers that these shortcomings are able to be addressed, we are particularly interested in stakeholders’ views on these and any other matters that may be of concern or that exhibit particular merit. We would also like to hear from stakeholders on whether they support the GTAC, and whether they agree with our preliminary assessment of it.
We welcome all feedback. The deadline for submissions is 5:00pm Monday, 19 March 2018. Submissions can be made using the template provided below.
First Gas additional GTAC material and consultation questions
On 8 March 2018, First Gas provided two additional items (available below) relating to the GTAC. The first item is a memo setting out additional questions that First Gas invites stakeholders to respond to in their submissions. The second item is an open letter from First Gas providing further information on the acquisition of the Ahuroa gas story facility.
GTAC Preliminary Assessment Paper - Submissions Workshop
Gas Industry Co tentatively plans to hold a submissions workshop on Tuesday, 27 March 2018 from 10.00am to 4.00pm at Gas Industry Co's office in Wellington. The purpose of the workshop is to enable stakeholders and Gas Industry Co to consider submissions on the Preliminary Assessment Paper and to ask questions about those submissions. It should provide a useful start to preparing cross-submissions. Please RSVP by Friday 23 March 2018 to Alison O'Connor. When you RSVP please indicate whether you plan to attend the workshop and if you would like to present your submission at the workshop.
Cross submissions
Discussions with stakeholders lead us to believe that significant new material will be presented in submissions on our preliminary analysis. Before completing a Final Assessment Paper, we want to ensure that other stakeholders have had an opportunity to comment on that material. We have therefore decided to hold a round of cross-submissions. The deadline for cross-submissions is 5:00pm Monday 16 April 2018.