7. Amendments to Pipeline Charge Disclosure Requirements
7.1 Disclosure of Gas Distribution and Transmission Charge Methodologies
7.1.1 Proposed Requirements
74. Regulation 20 requires pipeline owners to disclose the methodologies that they use to set their charges for gas distribution and transmission services. The Ministry proposes to amend this requirement so that methodology disclosures must:
- Describe the methodology used to calculate the charges;
- Include the key components of the revenue required to cover costs and profits of the pipeline owner's pipeline business activities, including cost of capital;
- State the consumer groups used to calculate the charges, including:
- the rationale for the consumer grouping;
- the method by which the pipeline owner determines which group consumers are in; and
- for each of these consumer groups, the statistics relating to that group which were used in the methodology;
- Describe the method by which the pipeline owner allocated the components of the revenue required to cover the costs of its pipeline business activities amongst consumer groups, including the rationale for allocation; and
- Describe the method by which the pipeline owner determined the proportion of fixed and variable charges, and the rationale for those proportions.
7.1.2 Rationale for Proposal
75. The level of methodology detail disclosed under the current Regulations is mixed. The enhancements to gas distribution and transmission charge methodology disclosure are intended to improve the level of detail disclosed, and better facilitate scrutiny of whether charges are set in an efficient and equitable manner.
7.2 Disclosure of Pipeline Charges
7.2.1 Proposed Requirements
76. The Ministry proposes that pipeline charges (Regulations 24 to 27) should be:
- Disclosed when they change (and not annually);
- Disclosed at least 20 working days in advance of taking effect;
- Disclosed by gas distributors/transmitters (and not retailers);
- Disclosed on a per consumer basis; and
- Published in local newspapers and (for pipeline charges payable by 5 or more consumers) on the Internet.
7.2.2 Rationale for Proposal
77. The rationale for these proposals is:
- requiring disclosure of pipeline charges annually and when they change (as is presently required) results in unnecessary duplication and compliance costs.
- a time limit is required for the Regulations. Good commercial practice is to require advance notification of changes to tariffs, so it would be appropriate for pipeline charges to be disclosed in advance. Given that pipeline charge methodologies need to be developed before pipeline charges can be implemented, there should be no reason why pipeline owners could not disclose pipeline charge methodologies in advance of their taking effect.
- the Regulations require pipeline charges to be disclosed because of regulatory concerns that arise for distributors' natural monopoly activities. The Ministry does not consider that gas retailers (where they differ from gas distributors, which is becoming increasingly common) should have to bear the compliance costs of these requirements.
- requiring pipeline charges to be disclosed on a per consumer basis will allow consumers to distinguish between the retailing (contestable) and pipeline (non-contestable) components of gas bills - which will facilitate competition.
- requiring pipeline charges to be published in local newspapers and on the Internet will enhance awareness and accessibility of pipeline charges.
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