In recognition of industry dissatisfaction with previous voluntary arrangements, and in line with the GPS requirement for sound arrangements for the management of critical gas contingencies, Gas Industry Co developed regulations for critical contingency management. The purpose of the regulations is to achieve the effective management of critical gas outages and other security of supply contingencies without compromising long-term security of supply.
The call for a regulatory approach to contingency management came with the understanding that gas outages of a sufficient magnitude, if left unchecked, could cause significant costs in both time and resources for both industry and customers. Where the market cannot self-manage such situations it was deemed necessary to put in place arrangements that enforce an obligatory curtailment and contingency pricing regime.
Specific objectives in establishing the regulatory solution were the appointment of a critical contingency operator, the preparation and publication of critical contingency management plans, and the development of a methodology for the determination and resolution of critical contingency imbalances. The regulations went live in January 2010 following Gas Industry Co's approval of the transmission system owners' critical contingency management plans.
A review of gas emergency arrangements was carried out in July 2006 which concluded with a recommendation that mandatory arrangements should be put in place. A statement of proposal was issued in August 2007 which outlined a replacement to existing arrangements in the form of regulations under the Gas Act. Gas Industry Co released two further consultation papers in December 2007 and May 2008 which discussed further refinements to the proposed regulations. A recommendation to the Minister of Energy was made in June 2008 to approve the Gas Governance (Critical Contingency Management) Regulations 2008 and associated amendments to the Gas Governance (Compliance) Regulations 2008. The regulations were gazetted on 6 November 2008 and came fully into effect on21 January 2010 once both transmisison system owners had their critical contingencyt management plans approved.
A critical contingency in October 2011, requiring a five-day shotdown of the Maui pipeline north of Taranaki, precipitated a review of the CCM Regulations. Information on that event can be found under the Market Administration tab in the CC Events sub-tab. There have been two substantive consultations to inform the review:
It is expected that a recommendation to amend the CCM Regulations will be sent to the Minister of Energy and Resources in 2013.
The original set of Guidelines were issued in February 2009, with the aim of providing clarity and consistency in the designation process for ESPs and MLCs.
The purpose of this revision of the Guidelines is to reflect experience to date on the designation process, and particularly arising from the Maui Pipeline outage in October 2011. Gas Industry Co is undertaking a comprehensive review of the Gas Governance (Critical Contingency Management) Regulations 2008, and it may be that this review will lead to changes in how ESPs and MLCs are defined and designated. It can, however, be a lengthy process to make changes to regulations, and industry participants have indicated a desire for an interim measure. As such, Gas Industry Co considers it appropriate to provide greater clarity to industry participants through a revision of the current Guidelines, so that lessons from recent experiences are implemented in a timely fashion and as far as possible within the scope of the regulations as they are currently drafted.
Please note that the proposed revisions to the Guidelines relate only to ESPs, not MLCs. Also, future changes to the regulations may require a further revision of the Guidelines or may negate the need for them.
The latest Guidelines can be found here
Gas Industry Co has engaged Concept Consulting Group to review the effectiveness of the critical contingency management processes and governance arrangements during the Maui outage.
Their discussion paper, "Review of Gas Critical Contingency Management" Post Maui Pipeline Outage", can be accessed below. We are keen to get your feedback and invite submissions on:
· Concept's discussion paper generally; and
· Specific questions developed by Gas Industry Co arising from Concept's discussion paper, which can be found in this document: Critical Contingency Review - Questions from Gas Industry Co
Submissions closed on Monday, 2 July 2012.
Update 31 July
Gas Industry Co has analysed the submissions received on the Concept Consulting Group discussion paper, 'Review of Gas Critical Contingency Management: Post Maui Pipeline Outage', which can be found in the Submissions Analysis document.
While submitters supported most of the recommendations in the Review Report, the submissions analysis notes that there is more work to be done in the areas of:
· Defining which, if any, customer categories would qualify for Essential Service Provider status beyond those providing critical care serv ices.
Gas Industry Co is working on preparing a Statement of Proposal, which is the formal description of proposed amendments to the CCM Regulations. We expect to issue this document for consultation in the current quarter.
This presentation from an industry workshop in May 2007 contains an updated and revised approach to emergency management based on submissions analysis from the July 2006 discussion paper. The proposal given at the workshop is a combination of a mandatory framework based on regulations together with industry arrangements that provide the details. The presentation also highlights key design issues and explores how the proposed hybrid approach will interact with MPOC mechanisms and processes.
This discussion paper reviews the current arrangements for dealing with gas outages and contingencies, recommends mandatory arrangements be put in place, and highlights the issues and design decisions that need to be addressed. Gas Industry Co will take into account feedback received on the paper when undertaking the detailed design of gas emergency arrangements.
This report, prepared for Gas Industry Co by Farrier Swier Consulting in association with Johnson Winter & Slattery, advises on the commercial issues involved in updating the National Gas Outage Contingency Plan (NGOCP). The overall objective is to develop a soundly based policy for pricing under outage and contingency situations. The report sets out detailed background information and analysis to enable stakeholders to provide informed input as a basis for a decision by Gas Industry Co on the most appropriate approach.
Second draft Amended Regulations (marked-up version compared against Original CCM Regs). This draft endeavours to reflect the proposals of the Statement of Proposal and the drafting changes suggested at the first drafting workshop held 13 March 2013. It shows all the changes to the original CCM regulations and is provided for discussion at the second drafting workshop. This document has not been subject to a full legal review. Participants should also note that the Parliamentary Counsel Office determines the final wording of any draft regulations recommended to Cabinet.
Second draft Amended Regulations (marked-up version compared against Initial draft CCM Regs). This draft endeavours to reflect the proposals of the Statement of Proposal and the drafting changes suggested at the first drafting workshop held 13 March 2013. It shows the changes since the Initial draft was circulated and is provided for discussion at the second drafting workshop. This document has not been subject to a full legal review. Participants should also note that the Parliamentary Counsel Office determines the final wording of any draft regulations recommended to Cabinet.
Initial draft Amended Regulations (marked-up version). In this draft we have endeavoured to reflect the proposals set out in the Statement of Proposal, as modified by the Analysis of Submissions. It addresses predominantly the operational matters canvassed in the consultation process and was provided for discussion at the first drafting workshop. This document has not been subject to a full legal review. Participants should also note that the Parliamentary Counsel Office determines the final wording of any draft regulations recommended to Cabinet.
Following the six day Maui pipeline outage in October 2011, Gas Industry Co and the Critical Contingency Operator (CCO) set out to capture critical contingency management lessons arising from the event. The CCO produced post-event Incident and Performance Reports, and made 19 recommendations for improvements. Many of these related to processes that have been addressed directly by the CCO and transmission system owners under existing provisions in the Gas (Critical Contingency Management) Regulations 2008 (CCM Regulations). Other recommendations involved potential changes to the CCM Regulations, and were referred to Gas Industry Co for consideration.
Having consulted widely, including commissioning a report by Concept Consulting and taking account of submissions on that report, we now issue a Statement of Proposal (SoP) setting out proposed changes to the CCM Regulations.
The Statement of Proposal can be found below.
Also below are the NZIER Report - Value added associated with gas demand and the Lowe Environmental Impact Report - Review of Methods for and Impacts of Raw Milk Disposal, both of which are referred to in the Statement of Proposal.
Date Published: August 2007
Industry members have requested Gas Industry Co develop mandatory
arrangements to replace the voluntary National Gas Outage Contingency Plan
(NGOCP). This Statement of Proposal puts forward replacement arrangements which
are a combination of regulations under the Gas Act and industry-developed
arrangements to meet the requirements of those regulations.
Date Published: 23 August 2007
This presentation on the draft outage and contingency management regulations
introduces changes in terminology, proposes a framework and timetable for
implementation and gives a breakdown of the draft regulations and supporting
Date Published: October 2007
A statement of proposal was released in August 2007 which put forward
arrangements for the replacement of the NGOCP. The proposed hybrid approach is
a combination of regulations under the Gas Act and industry-developed
arrangements to meet the requirements of those regulations. Submissions were
sought on the proposal and have been collated and analysed. This document sets
out the submissions analysis, a summary of changes to the regulations in light
of submissions and the next steps which include an industry workshop and
further consultation on the revised draft regulations.
Date: 27 November 2007
The purpose of the workshop was to review and discuss a number of proposed changes to the statement of proposal which was issued in August 2007. The agenda included:
Date Published: December 2007
The supplementary consultation paper focuses on a number of issues that were raised in response to the statement of proposal issued in August 2007. Gas Industry Co has proposed ways of addressing the issues raised and seeks feedback on these. There are some additional issues that have been identified separately from the submissions process and these are also discussed together with solutions being presented. The paper includes a revised set of draft regulations.
Date Published: March 2008
This paper provides an analysis of the submissions in response to questions included in the supplementary consultation paper of December 2007. Next steps suggested in this paper include establishing an industry implementation group to help co-ordinate the preparation work for the new arrangements, and developing terms of reference for the critical contingency operator (CCO) service provider agreement.
Date Published: May 2008
This paper builds on the previous Statement of Proposal (August 2007) and Supplementary Consultation Paper (December 2007) and focuses on changes to the proposed regulations since the December 2007 paper. These changes are mainly in response to comments received from MED and PCO. The paper also outlines the role of the Contingency Management Implementation Group (CMIG), reports on the service provider contract to appoint Vector as the CCO, and provides a further opportunity for comment on the draft regulations before a recommendation is made to the Minister.
Date Published: June 2008
Gas Industry Co is recommending regulations providing for the effective management of critical gas contingencies, called the Gas Governance (Critical Contingency Management) Regulations. The proposed regulations include mandatory processes for the management of critical contingencies, including compliance with curtailment instructions. An effective compliance regime is crucial to ensuring that the proposed regulations achieve their purpose. In a statement of proposal on critical contingency management arrangements issued in August 2007, Gas Industry Co proposed that the existing compliance regulations be amended to apply to the proposed contingency management regulations. This paper sets out the proposed amendments.
Date Published: June 2008
This document recommends regulations to ensure effective and efficient management of a situation when gas is in short supply (whether due to a short-term production outage or physical problems with a transmission system) and the market proves unable to manage that situation through normal commercial operations.
On 14 January 2010 Gas Industry Co published a notice in the New Zealand Gazette stating that it had approved critical contingency management plans covering the whole transmission system and announcing the go-live date, 21 January 2010, on which parts 3 and 4 of the regulations come into force. The text of this notice is available by clicking on the link below.
The presentation below was developed by Gas Industry Co and the critical contingency operator to highlight the key responsibilities of industry participants and consumers under the new contingency management arrangements and to summarise the communication protocols between the parties affected by contingency events.
The Gas Governance (Critical Contingency Management) Regulations 2008 (the Regulations) were published in the New Zealand Gazette on 6 November 2008. Parts 1, 2 and 5 came into force on 4 December 2008 and parts 3 and 4 came into force on 21 January 2010 (the go-live date).
The purpose of the Regulations is to achieve the effective management of critical gas outages and other security of supply contingencies without compromising long-term security of supply. The Regulations provide for:
Part 1 covers general provisions for the appointment of the CCO and terms of the CCO service provider agreement, the scope of the Regulations, funding of the development and ongoing fees, and the giving and receiving of notices.
Part 2 covers the obligations of certain parties prior to the critical contingency management go-live date (Go-Live Date), in relation to CCMPs, the communications plan and information guide, and the provision of transmission system and consumer information.
Part 3 sets out the processes for the determination, declaration and termination of a critical contingency and the role and obligations of certain parties during a contingency event.
Part 4 provides for obligations after critical contingency events, including reporting requirements, and processes for the appointment of an industry expert, determination of a critical contingency price and the determination and resolution of contingency imbalances.
Part 5 provides for miscellaneous activities such as audits, the treatment of critical contingencies occurring before the Go-Live Date and the separation of roles for the CCO.
For each proposed CCMP or amendment to a CCMP, an expert adviser must be appointed by Gas Industry Co to review the proposed plan or amendment and to make a recommendation on whether Gas Industry Co should approve the proposed plan or amendment. Gas Industry Co must appoint an expert adviser within 30 business days of the commencement date in the case of a proposed plan and, for a proposed amendment, within 5 business days of receiving the amendment from the TSO.
On 27 January 2009, Gas Industry Co appointed Concept Consulting Group Limited as the Expert Adviser to review the initial critical contingency management plans proposed by Vector Gas Limited and Maui Development Limited respectively.
The terms and conditions of the appointment are available by clicking on the link below:
Gas Industry Co must appoint an independent industry expert to determine the critical contingency price within 10 business days of the termination of a critical contingency. Each TSO, interconnected party, and shipper who will be affected by the determination of a critical contingency price may nominate 1 person to be considered by Gas Industry Co when appointing the industry expert.
The Contingency Management Regulations provide for the industry body (Gas Industry Co) to determine and publish certain matters regarding the operation of the regulations. Notice of these determinations is available by clicking on the link below:
Date Published: May/June 2008
In the lead-up to the Contingency Management REgulations being made, a group was convened by Contact Energy, and its role was to work towards a better understanding of the interdependencies between the electricity and gas sectors. Membership of the group was broad, covering gas transmission, electricity generation, electricity system operation (Transpower), the Electricity Commission and Gas Industry Co. Both Vector and Contact Energy undertook modelling work which was presented to that group and the outputs from that work are provided below.
The CCO (Vector Gas Limited) was appointed by Gas Industry Co on 28 November 2008.
This is in line with regulation 6 which requires Gas Industry Co to appoint the person that is the system operator of all of the transmission system as the CCO for an initial term of 5 years. Regulation 8 of the Contingency Management Regulations requires that Gas Industry Co publish the CCO service provider agreement. Accordingly, a copy of the service provider agreement is available by clicking on the link below.
Regulation 10(3) of the Gas Governance (Critical Contingency Management) Regulations 2008 requires that the industry body publish a map depicting the transmission system based on information supplied by transmission system owners under regulation 10(1).
The transmission system map, along with the accompanying pipeline
schematics, is available to view or download from the publications section of
the CCO's website which can be accessed by clicking on the link
The map can also be viewed by clicking directly on the link below.
The following critical contingency management plans were approved by Gas Industry Co on 11 September 2012.
Before submitting a proposed critical contingency management plan (CCMP) for approval, transmission system owners (TSOs) are required to consult on a draft of the proposed plan with persons representative of the interests of those likely to be affected by the CCMP.
Immediately before this consultation TSOs must provide a draft of the proposed CCMP to the industry body, which must be published on its website.
Gas Industry Co has received draft proposed CCMPs from Maui Development Ltd and Vector Gas Transmission Ltd, which are available to view or download by clicking on the links below. You can also find Vector Gas Transmission Ltd's Draft Proposed Information Guide and Communications Plan under the CCO tab under 'Market Administration'
Please note that submissions on the draft proposed plans should be made directly to the relevant TSO.
MDL Draft Critical Contingency Management Plan (submissions closed 10 February 2009)
Vector Draft Critical Contingency Management Plan (submissions closed 10 February 2009)
Proposed CCMPs were submitted to Gas Industry Co for approval in February 2009. The plans were reviewed by the expert adviser, who gave notice on 27 March 2009 that the plans should not be approved by Gas Industry Co. Following revisions in accordance with the expert adviser's notice, the TSOs resubmitted proposed CCMPs for approval on 15 April 2009. The resubmitted plans are available to view or download by clicking on the links belows.
On 18 May 2009 the expert adviser notified Gas Industry Co that the two amended plans had not been recommended for approval as they were incomplete. TSOs were therefore given 10 further business days to amend their proposed plans in line with the expert adviser's notice.
MDL resubmitted an amended proposed CCMP on 26 May 2009, and Vector submitted on 4th June. The plans can be accessed by clicking on the links below.
On 3 July 2009 the expert adviser wrote to Gas Industry Co to recommend that the proposed CCMP submitted by MDL on 26 May 2009 not be approved. MDL subsequently submitted an amended proposed CCMP which can be accessed by clicking on the link below.
On 14 July 2009 the expert adviser wrote to Gas Industry Co to recommend that the proposed CCMP submitted by Vector on 4 June 2009 not be approved. Vector subsequently submitted an amended proposed CCMP which can be accessed by clicking on the link below.
On 17 August 2009 the expert adviser wrote to Gas Industry Co to recommend that the proposed CCMP submitted by MDL on 17 July 2009 not be approved. MDL subsequently submitted an amended proposed CCMP which can be accessed by clicking on the link below.
On 23 October 2009 the expert adviser wrote to Gas Industry Co to recommend that the proposed CCMP submitted by Vector on 23 September 2009 not be approved. Vector subsequently resubmitted an updated proposed CCMP which can be accessed by clicking on the link below.
On 9 September 2009 Gas Industry Co received a recommendation from the expert adviser to approve MDL's proposed CCMP. After considering the plan, Gas Industry Co agreed that it complies with regulation 25 and gives effect to the purpose of the regulations and the CCMP was therefore approved on 16 September. The approved CCMP can be viewed by clicking on the link below. The regulations referred to as Attachment 1 can be found here
On 10 December 2009 Gas Industry Co received a recommendation from the expert adviser to approve Vector's CCMP. After considering the plan, Gas Industry Co agreed that it complies with regulation 25 and gives effect to the purpose of the regulations and the CCMP was therefore approved on 18 December 2009. The approved CCMP can be viewed by clicking on the link below.
These Guidelines are not required under the Regulations. Gas Industry Co intends to use the Guidelines as a means of ensuring a consistent approach to designations in respect of large consumers and in considering designation disputes from consumers generally. Although the Guidelines do not have any particular status under the Regulations, it is hoped that retailers will perceive value in the Guidelines when processing applications from their customers. In this way, classifications could be expected to be reasonably consistent across retailers. Please note these Guidelines are not legally binding and need to be read in conjunction with the Regulations. The general approach set out in these Guidelines in no way reduces the requirement upon participants to know and comply with their obligations under the Regulations.
Regulations 17 through 19 of the Contingency Management Regulations provide for ongoing fees to be paid by wholesale purchasers of gas on a monthly basis to meet the critical contingency ongoing costs. The critical contingency ongoing costs are the costs:
Gas Industry Co has determined that the critical contingency ongoing costs should exclude any overhead costs or policy work resulting from operational activities under the Contingency Management Regulations. Any such work is to be funded from the Gas Industry Co Levy. The critical contingency ongoing costs therefore only relate to other direct external costs in connection with Gas Industry Co administering the Contingency Management Regulations.
For each year following the first year or part year of operation, Gas Industry Co must estimate and publish a breakdown of the estimated critical contingency ongoing costs for that year.
|Cost categories||Estimated cost|
|Service provider fees||$522,000|
|Industry expert costs||$20,000|
|Expert adviser costs||$10,000|
|Total ongoing costs||$623,000|
|Cost categories||Estimated cost|
|Service provider (establishment and base fees)||$358,872|
|Service provider (event fee)||$71,000|
|Industry expert costs||$23,000|
|Expert adviser costs||$10,000|
|Total ongoing costs||$462,872|
|Invoice month||for gas consumed in||CC ongoing cost ($/GJ)|
|July 2012||May 2012||$0.0027544186|
|August 2012||June 2012||$0.0028934490|
|September 2012||July 2012||$0.0025417437|
|October 2012||August 2012||$0.0024667746|
|November 2012||September 2012||$0.0025219509|
|December 2012||October 2012||$0.0028970302|
|January 2013||November 2012||$0.0029997012|
|February 2013||December 2012||$0.0030743533|
|March 2013||January 2013||$0.0028703370|
|April 2013||February 2013||$0.0032900215|
|May 2013||March 2013||$0.0025960549|
|Service provider (establishment and base fees)||$436,000||$308,257|
|Service provider (event fee)||$71,000||$189,082|
|Event related costs||$45,000||$32,193|
|Less over-recovery on CCO base fee from previous years||($135,834)|
|Total ongoing costs||$552,000||$393,698|
|Invoice month||for gas consumed in||Estimated ($/GJ)||Actual ($/GJ)|
|July 2011||May 2011||$0.0037349951||$0.0026638770|
|August 2011||June 2011||$0.0037271165||$0.0026582584|
|September 2011||July 2011||$0.0032252889||$0.0023003433|
|October 2011||August 2011||$0.0030797146||$0.0021965177|
|November 2011||September 2011||$0.0032191022||$0.0022959308|
|December 2011||October 2011||$0.0036823987||$0.0026263641|
|January 2012||November 2011||$0.0038646880||$0.0027563767|
|February 2012||December 2011||$0.0041389326||$0.0029519737|
|March 2012||January 2012||$0.0040885232||$0.0029160219|
|April 2012||February 2012||$0.0038239020||$0.0027272878|
|May 2012||March 2012||$0.0041785727||$0.0029802458|
|June 2012||April 2012||$0.0037327213||$0.0026622553|
Notices published by the Critical Contingency Operator (CCO) during a critical contingency event are available on the CCO's website click here
Following the termination of a critical contingency, the CCO is required to publish the following reports:
In the case of a non-regional critical contingency, regulations 67-81 provide for a process for setting contingency imbalances.
Answers to some common questions about critical contingency events and gas user obligations.
A critical contingency incident on the gas transmission system caused by an unplanned outage at the Pohokura Poduction station was declared at 12.48pm on Saturday 3 March 2012, and terminated at 11.39pm on the same day. The event resulted in a requirement for reduced consumption by large gas users. The Critical Contingency Operator (CCO) has issued an Incident Report and Performance Report. Documents and other information relating to this event are available at the CCO Information Exchange at www.oatis.co.nz
Under regulations 67 to 72, Gas Industry Co is required to engage an industry expert to determine a critical contingency price that will be applied to contingency imbalances sustained by interconnected parties and shippers during the event. Tim Denne of Covec was engaged for this work and his final price report is available below.
A critical contingency incident on the gas transmission system caused by a gas escape from the Maui pipeline was declared at 1.25am on 25 October 2011, and terminated at midday on 30- October 2011. Documents and communications relating to this event are available below.
Review of Gas Critical Contingency Management
Gas Industry Co has engaged Concept Consulting Group to review the effectiveness of the critical contingency management processes and governance arrangements during the Maui outage. For more information click here.
Post Maui Pipeline Outage Review - Update 7 May
Work in capturing lessons from the five-day Maui outage in October last year is well advanced.
A critical contingency was declared at 19:36 on 13 July 2010 and was
terminated at 22:34 on 13 July 2010.
Under the Gas Governance (Critical Contingency Management) Regulations 2008, a number of reports have been published in respect of this event: