Corporate

The Gas Act enables Gas Industry Co to recommend to the Minister of Energy that regulations be made requiring industry participants to pay a levy to the industry body. The purpose of the levy is to recover the estimated costs of Gas Industry Co exercising its functions as the industry body. It is required to be established each year and there is a new consultation every year to achieve this. The objective of the Levy Arrangements project is to deliver a levy recommendation to the Minister of Energy, sufficient to fund the planned activities of Gas Industry Co in the relevant financial year and ensure that the balance of Industry Advances Reserve account is within acceptable limits.

Statement of Levy Principles

The purpose of the Statement of Levy Principles is to describe the legislative authority, levy principles and levy structure Gas Industry Co uses when developing its levy recommendation for funding each year, under the levy provisions of the Gas Act 1992. The paper assumes all the topics covered within it have been settled and are agreed to.

Levy Process

December 2011

Gas Industry Co has issued a Statement of Proposal setting out options for improving processes for gathering information required to assist with its policy development process.

Background

The Statement of Proposal has emerged from:

· a request by the Minister to establish a process for investigating disputes over access to private pipelines;

· work on gas transmission capacity/access, insolvent gas retailers, gas quality, transmission interconnection, and wholesale gas trading, where difficulties have been experienced or anticipated by Gas Industry Co in accessing certain information, or accessing it in timely fashion; and

· assessment of current and likely future issues where access to information could affect Gas Industry Co's ability to fulfil its function and goals.

The objective of any solution proposed in the Statement of Proposal (including the objective of any resulting regulations) is to develop a process or processes that will empower Gas Industry Co to ensure the supply of certain information from industry participants to settle particular issues in the gas industry to aid in the timely development of market solutions.

Any information gathering process would form part of Gas Industry Co's overall policy development process, which has been designed to meet the consultation and assessment requirements for recommending gas governance regulations under sections 43L and 43N of the Gas Act. Gas Industry Co will continue to engage with the industry on policy issues and, in the first instance, seek voluntary information disclosure where possible. Any regulations setting out an information gathering process for settling particular issues would accordingly operate as a backstop or 'last resort' for information gathering

Rational and Issues

The industry body must each year develop a Strategic Plan setting out the current issues affecting the gas industry and how it intends to address them over the next 1-3 years so as to achieve the outcomes and objectives of the Gas Act and GPS. Gas Industry Co has also developed a process for investigating and addressing issues included in the Strategic Plan, which has been designed to meet the consultation and assessment requirements for recommending gas governance regulations under sections 43L and 43N of the Gas Act. As part of that process, it is sometimes necessary to request information from industry participants to aid in the analysis and assessment of an issue. The Statement of Proposal has emerged from:

· a request by the Minister to establish a process for investigating disputes over access to private pipelines;

· work on gas transmission capacity/access, insolvent gas retailers, gas quality, transmission interconnection, and wholesale gas trading, where difficulties have been experienced or anticipated by Gas Industry Co in accessing certain information, or accessing it in timely fashion; and

· an assessment of current and likely future issues where access to information could affect Gas Industry Co's ability to fulfil its function and goals.

Further details of the six specific issues referred to above, which are the subject of the proposal, are set out in section 1 below.

The availability of information is fundamental to the development and operation of efficient and competitive gas markets, especially those based on private ownership and with features such as monopolies and constraints. Better information for all participants will lead to a clearer understanding of market operations, more efficient decision making, and improved development of voluntary and regulatory solutions.

Objective

The objective of any solution (including the objective of any resulting regulations) is to develop a process that will empower Gas Industry Co to ensure the supply of certain information from industry participants to settle particular issues in the gas industry to aid in the timely development of market solutions.

Options

The Act requires the industry body to identify all reasonably practicable options for achieving the objective of any potential or proposed regulation. This may include both voluntary and regulated options, and effective information gathering arrangements may assist with either. The Company has identified five options for addressing the issue of ensuring efficient and effective information gathering as part of a policy development process. These are discussed in sections 2 and 3 of this paper, and in summary are:

· maintain the status quo;

· rely on the dissemination of information gathered by other agencies such as the Commerce Commission and the Ministry of Economic Development (MED);

· establish an industry agreed protocol on the identification of, request for, and handling of information as part of Gas Industry Co's policy development process to address market failures;

· develop specific rules or regulations on a case-by-case basis to enable the settling of a particular issue within the gas industry each time that Gas Industry Co is unable to obtain the information necessary to progress policy development on that issue; or

· develop a regulatory framework that would act as a last resort means of providing Gas Industry Co with access to particular information to enable the settling of identified issues within the gas industry. The framework would be triggered only when other means of information gathering have not succeeded in obtaining the necessary information.

Recommendation

Following the assessment set out in the Statement of Proposal, including a cost/benefit analysis and assessment against the MED's Code of Good Regulatory Practice, Gas Industry Co recommends the final option above.

Particular regard has been had to:

· the purposes for which regulations can be made under section 43G(2)(l) of the Gas Act;

· the need to carefully justify any new information-gathering power; and

· imposing the least compliance burden possible for the information gathering process: and

· addressing potential concerns with respect to managing the scope of information requests and commercially sensitive information.

The information requested would need to:

· relate to a matter identified in the regulations;

· contain specific details as to the information being sought; and

· only be made once other options are exhausted.

The information gathering process included in the proposed regulations would form part of Gas Industry Co's overall policy development process, which has been designed to meet the consultation and assessment requirements for recommending gas governance regulations under sections 43L and 43N of the Gas Act. Gas Industry Co will continue to engage with the industry on policy issues and, in the first instance, seek voluntary information disclosure where possible. Any regulations setting out an information gathering process for settling particular issues would accordingly operate as a backstop or 'last resort' for information gathering.

Next steps

Gas Industry Co invites submissions on the Statement of Proposal and any answers to the specific questions contained in Appendix A by 17 February 2012. After considering submissions on this Statement of Proposal, Gas Industry Co envisages making any recommendation to the Acting Minister of Energy and Resources by May 2012, with a view to implementing the recommended regulations by approximately September 2012.