Gas (Information Disclosure) Regulations Newsletter (No. 1, March 1996)
[ Last Updated 21 December 2005 ]
Purpose of the Gas (Information Disclosure) Regulations
Information disclosure is designed to help:
- promote competition in gas retailing and wholesaling (e.g. by clearly "ringfencing" natural monopoly and potentially competitive sectors). Information disclosure does this by:
- promoting open access to natural monopoly pipelines;
- revealing predatory pricing; and
- revealing cross-subsidies between natural monopoly and competitive activities.
- discourage monopoly pricing (i.e. excessive profits and/or costs); and
- discourage excessive cross-subsidies between consumer classes.
The Regulations will detail disclosure requirements in respect of the following major items:
- separate financial statements for wholesaling, transmission, distribution, retail activities and other services (and associated methodologies for separation of these businesses);
- contract details, including price, of contracts made on or after 1 August 1990; and modifications made after that date to contracts (for wholesaling and gas conveyance activities and related services);
- conveyance performance measures for supply of line services by pipeline owners;
- line charges for gas distributors and gas retailers charging for line services, and associated methodologies;
- unaccounted-for gas; and
- pipeline capacity.
Progress on the Drafting of the Gas (Information Disclosure) Regulations
The drafting instructions for the Regulations were forwarded to the Parliamentary Counsel Office (PCO) for drafting in February 1996. The disclosure requirements are substantially in their final form but, in response either to industry comments or experience with the electricity disclosure regulations, we are tidying up some aspects of the gas disclosure regime. In particular:
- distribution capacity disclosure;
- unaccounted-for gas;
- matching costs and revenues by tariff category to audited financial statements; and
- ensuring that customer characteristics incorporated in pre-August 1990 contracts can be required to be disclosed along with modifications to those contracts
Key industry participants will be hearing more about these issues in the near future.
PCO is not in a position to say when a draft might be completed, but we are optimistic that the Gas (Information Disclosure) Regulations will be promulgated about the middle of the year. Among other things, this newsletter will keep the industry informed of drafting progress.
Exemptions for Pipelines
The Ministry recognises that certain gas pipelines do not impact on competitive (or potentially competitive) gas markets. It is therefore proposed to exempt owners of such pipelines completely from the requirement to comply with the proposed regulations, in respect of those pipelines.
In the course of drafting the regulations, the Ministry has compiled a list of 11 existing pipelines which appear to both warrant exemption, either as:
- LPG Pipelines
- LPG pipelines are not natural monopolies, in that competitive quantities of LPG may be transported competitively by truckship/rail;
or as:
- Dedicated Pipelines
- Dedicated pipelines are purpose-built to carry gas from a production or processing facility directly to a consumer (but there is also the special case of gathering pipelines which carry gas from a production facility to a processing facility). Key features of dedicated pipelines are:
- They are not part of a transmission or distribution system;
- The gas they convey has only one destination; and
- They are unlikely to be of interest to other parties (the exemption can be reconsidered should this change).
- Note that the nature or standard of the gas conveyed is not a factor in the exemption of dedicated lines.
Initially, affected pipelines will be listed by name in the regulations as exempt from information disclosure. Subsequently, pipeline owners seeking an exemption (e.g. for a new pipeline) will be required to submit an application to the Ministry. Successful applications will be approved by the Secretary of Commerce, and gazetted.
The Maui On-Shore Pipeline
In December 1994 the Ministry issued a discussion paper on the application of the proposed gas information disclosure regulations to the Maui On-Shore transmission DiDeline. The owner of the Maui DiDeline will be required to disclose the following:
- contracts (including prices) entered into on or after 1 January 1993; and modifications made after that date to new and existing contracts;
- methodologies for pricing; and
- certain capacity provisions - namely:
- a pipeline system map;
- intake point volumes;
- historical offtake point volumes and load increments; and
- methodologies used for determining capacity.
Exemption for Pipeline Owners as Wholesalers in Respect of UFG
The question has been raised as to whether pipeline owners might be subject to disclosure as wholesalers if they deal in gas as part of their allowance for unaccounted-for-gas. It is proposed to exempt pipeline owners from disclosure as wholesalers, if they fall within the definition of wholesalers because of the way the disclosure of unaccounted-for-gas is handled in their contractual arrangements.
Disclosure Guidelines
As readers will be aware, the purpose of the Guidelines is to assist distribution pipeline owners in complying with the regulations by suggesting methodologies in certain cases where disclosure of methodologies is required.
Compliance with the Gas Act and the Gas (Information Disclosure) Regulations will, of course, be mandatory. Compliance with the Guidelines, however, will not be. Where the methodologies suggested in the Guidelines are used, disclosure requirements for methodologies may be confined to a brief statement to the effect that the Guideline approach has been adopted. Where methodologies are employed which in any way depart from the approach in the Guidelines, those departures will need to be disclosed in full.
The Ministry is now finalising the Guidelines (a draft was released some time ago) to:
- ensure the Guidelines line up with the Regulations;
- expand explanatory material as required;
- reduce material which offers options (options are inconsistent with the purpose of the Guidelines); and
- ensure consistency with relevant legislation.
Some consultation may be required as this work proceeds, with the intention of finalising the Guidelines by the date the Regulations are promulgated.
Amendments to Information Disclosure Provisions of the Gas Act
Forty-three submissions have been received in response to a discussion paper issued by the Ministry in December 1995 on amendments to the Electricity and Gas Acts. Fourteen of these refer to proposed disclosure amendments. Submissions are being analysed at present, and a summary of submissions, and the Ministry's responses will be issued in due course.
Gas (Statistics) Regulations
Submissions of the Ministry's November 1995 discussion paper have been received and are being considered. Some further discussion with the industry may be needed. These regulations are being co-ordinated by the Modelling and Statistics Unit of the Energy Policy Unit.
Energy Market Regulation Unit
Energy and Resources Division
Ministry of Commerce
Wellington
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