10. Miscellaneous Proposed Amendments
10.1 Maui Pipeline's Exemptions from the Gas (Information Disclosure) Regulations
91. Regulation 29 exempts Maui Development Limited from various components of the Regulations. These exemptions mean that the company is only required to disclose:
- the prescribed terms and conditions of contracts entered into on or after 31 December 1992 (Regulation 9) and any changes in the terms and conditions attaching to contracts entered into before or after this date (Regulation 10), together with characteristics for identification of customer type (Regulation 14);
- performance measures, covering financial, efficiency, energy delivery efficiency and reliability, and statistics, relating to contracts entered into on or after 31 December 1992 (Regulations 15 to 19);
- pipeline pricing methodologies, relating to contracts entered into on or after 31 December 1992, where the prices charged for pipelines services are separately identifiable (Regulation 20);
- methodologies for the allocation of costs and transfer payments, relating to contracts entered into on or after 31 December 1992 (Regulations 21 and 22); and
- information in relation to pipeline capacity (Regulation 23), excluding the information in clause 8 of Part 5 of Schedule 1 (gas held or reserved in transmission systems), unless the level of holding or reservation changes from the levels at 1 January 1993.
10.1.1 Proposed Requirements
92. The Ministry proposes to extend Maui Development Limited disclosure requirements so that disclosure is required of pipeline charges and pricing methodologies for all new contracts rather than just for those where the transmission charge is separately identifiable.
93. It is also proposed to amend the regulations so that no disclosure is required in relation to:
- performance measures (financial, efficiency, energy delivery efficiency and reliability performance measures) and statistics, irrespective of whether they relate to contracts entered into on or after 31 December 1992; and
- methodologies for the allocation of costs and transfer payments, irrespective of whether they relate to contracts entered into on or after 31 December 1992.
10.1.2 Rationale for Proposal
94. Continuation of a range of exemptions for the Maui pipeline is considered justified, on the grounds that:
- the Maui contracts are long term bundled contracts (i.e. they contain but do not distinguish between pipeline and energy charges);
- the buyers under the contracts have pre-emptive rights to any spare capacity;
- the Kapuni pipeline parallels the Maui pipeline; and
- access to the Maui pipeline by parties other than the contracted buyers is governed by the Commerce Act rather than by information disclosure per se.
95. However, the Ministry is proposing that pipeline charges and pricing methodologies for all new contracts (rather than just for those where the transmission charge is separately identifiable) be disclosed. This in effect would mean that future charges for use of the Maui pipeline would be required to be unbundled. This would benefit the industry through greater transparency of pricing. As the Maui pipeline is currently only used for the transmission of Maui gas under the Maui contracts, the immediate impact on Maui Development Limited is expected to be minimal.
96. The proposed deletion of disclosure requirements in relation to performance measures and statistics, methodologies for cost allocation and transfer payments relating to contracts post-dating 31 December 1992 recognises that it is not meaningful to distinguish activity in these areas carried out in respect of contracts signed before and after this date. Much of the information would need to be drawn from financial statements - it is not meaningful to call for the preparation of financial statements covering contracts defined in relation to a particular time period. Present policy is that Maui disclosure should not be required in relation to contracts signed before the end of 1992 (the date at which an intention to apply disclosure to the Maui pipeline was announced), and it is not intended to change this policy.
10.2 Nova Gas's Exemptions from the Gas (Information Disclosure) Regulations
10.2.1 Proposed Requirements
97. Under Regulation 30 and Schedule 2, Nova Gas Limited's landfill gas pipelines are exempt from Regulations 6 to 27. The Ministry proposes to extend this exemption to all of the Regulations, for all of Nova Gas's activities.
10.2.2 Rationale for Proposal
98. We are aware of a view in the industry that Nova Gas should be subject to information disclosure. The key judgment is whether Nova Gas's activities have any natural monopoly characteristics, or market dominance. If they do not there is no regulatory justification for Nova Gas to be subject to the Regulations.
99. Nova Gas's pipelines can (with minor exceptions) be categorised as providing bypass competition to other pipeline networks9 (and therefore are not natural monopolies). Its other activities are also contestable (gas collection and production, and gas retailing). The Ministry therefore considers that Nova Gas does not have market dominance, and that it should not be subject to the Regulations.
10.3 Proposals for Technical Amendments to the Pipeline Capacity Disclosure Requirements
100. Capacity disclosure requires all pipeline owners to disclose information about their pipeline systems including system maps, information about throughput at major off-take (delivery) points, and the methodologies used to generate the disclosed data.
10.3.1 Proposed Requirement
101. The Ministry has developed a set of proposals to amend the gas capacity disclosure requirements. These are specified in Annex 2, along with their respective rationales. Comments are invited.
10.3.2 Rationale for Proposal
102. Capacity disclosure primarily contributes to the identification of anti-competitive behaviour in respect of the provision of access to network services. Submissions in response to the Ministry's 1998 discussion paper identified various technical aspects of the capacity disclosure requirements that could be improved.
10.4 UFG Ratio
10.4.1 Proposed Requirements
103. It is proposed to add requirements that the disclosed UFG ratio (Clause 1(b), Part 3, Schedule 1):
- Show whether the ratio is positive or negative; and
- Be accurate to 2 decimal places.
104. We welcome comments on these proposals and on whether reliability performance measures should be disclosed on an overall basis (i.e. one UFG ratio figure for each distribution pipeline owner), or on a disaggregated basis, as per Enerco's 1996/1997 and 1997/1998 disclosures. (Disaggregated disclosure is not contemplated for financial statements or financial performance measures.)
10.4.2 Rationale for Proposal
105. In a given year, the disclosed UFG ratio may represent a "gain" or a "loss". Some pipeline owners have clearly noted positive or negative ratios. This proposal will ensure that it the situation is always clear. Most pipeline owners disclose this ratio to 2 decimal places. This proposal will ensure all do.
10.5 Provision of Disclosed Material on the Internet
10.5.1 Proposed Requirements
106. It is proposed that pipeline owners be required to publish on the Internet:
- Financial statements (also required to be published in the Gazette);
- Performance measures (also required to be published in the Gazette);
- Methodologies for estimates used in calculating performance measures;
- Proposed form for derivation of financial and efficiency performance measures from financial statements;
- Notification of new valuation reports;
- Notification of new asset management plans;
- Current and immediately preceding pipeline charges; and
- Gas pipeline capacity, excluding maps and diagrams.
107. Any person that is required to publish any information on the Internet would also be required to publicly disclose the Uniform Resource Locator of the Internet site where the information can be found. The Ministry would include these on a links page on its website.10
10.5.2 Rationale for Proposal
108. Internet disclosure is proposed to make access to disclosed information easier, quicker and cheaper for interested parties, and to facilitate downloading spreadsheets for ease of analysis.
10.6 Standard Formats for Internet Disclosures
10.6.1 Proposed Requirements
109. The Ministry is considering developing a standard format for Internet and Gazette disclosures. We welcome comments.
10.6.2 Rationale for Proposal
110. The regulations stipulate what information must be disclosed but not the format of the disclosures.
111. There could be advantages to both users (e.g. easier comparison of disclosures) and pipeline owners (e.g. making disclosure more of a "fill-in-the-box" exercise would help meet the proposed 4 month disclosure deadline) if the information disclosed by all pipeline owners was presented in a standard format in the Gazette and on the Internet.
112. A standard-form derivation table in Excel spreadsheet format has been introduced in the Electricity (Information Disclosure) Regulations 1999 (as discussed in section 5.5). The table is available from the Ministry's web-site, and is used to derive the financial performance ratios from disclosed financial statements.
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