The Gas Act 1992 (the Gas Act) provides for regulations to be made for the purpose of 'prescribing reasonable terms and conditions for access to transmission or distribution pipelines'. Gas Industry Co's 2006 review of transmission access issues identified a number of concerns relating to interconnection with transmission pipelines. Subsequent discussions between Gas Industry Co and interconnecting parties suggested that: interconnection processes were poorly defined; technical requirements for interconnection equipment had been changed during the course of projects; roles and responsibilities had been confusing; and liability/insurance matters had not been addressed until late in the process.
The objective of this Interconnection work programme is to ensure that the arrangements for interconnection with transmission pipelines are reasonable. If necessary, as the industry body under the Gas Act, Gas Industry Co may recommend the introduction of rules or regulations to achieve the objectives of the Gas Act and Government Policy Statement on Gas Governance (GPS).
Gas Industry Co has developed Interconnection Guidelines (Guidelines) that set out its view on the features of good interconnection practice. Although these guidelines have no legal standing, Gas Industry Co intends that transmission system owners (TSOs) should use them to develop their interconnection services. It is also intended that parties seeking interconnection use them as a guide to the principles, processes, documentation, and dispute arrangements that might apply.
Gas Industry Co will monitor the interconnection services provided by pipeline owners. If these services do not meet the requirements of the Gas Act and GPS, Gas Industry Co will consider other options for improvement, including recommending rules or regulations to the Minister of Energy and Resources (Minister).
Summary of Status
In 2009, Gas Industry Co conducted an initial review of the interconnection arrangements of both Maui Development Limited (MDL) and Vector Limited (Vector) against the Guidelines. Both MDL and Vector made further improvements in response.
In 2010, we formally assessed the improved interconnection arrangements against the objectives of the Gas Act 1992 and Government Policy Statement on Gas Governance 2008. The findings were generally favourable.
In a letter dated 9 March 2011, the Associate Minister of Energy and Resources acknowledged this progress and requested Gas Industry Co to '…undertake a formal review of the current interconnection arrangements after the next two interconnections to each of the transmission pipelines, or by the end of 2013, whichever is sooner.'
In a letter to the Minister, dated 20 December 2013, Gas Industry Co advised that in response to the 2011 request, we have reviewed two physical interconnections to the Vector pipeline, but that no substantial interconnections to the Maui pipeline had occurred. However, two significant new Maui pipeline interconnections are expected to occur in the first half of 2014. We therefore propose waiting for these interconnections before completing our review.
The letter to the Minister also advises of the 'interconnection' of the gas trading markets. During 2013, the New Zealand Exchange (NZX) finalised arrangement for a gas market 'connected' to the Maui pipeline, and Energy Market Services ('EMS', a commercial business group within Transpower NZ) finalised arrangements for a gas market 'connected' to the Vector pipeline. These gas market arrangements do not relate to the interconnection of physical equipment, but do raise some similar issues. Also, given that gas trading on a centralised platform is a new concept for the New Zealand gas market and has the potential to improve market efficiency, Gas Industry Co suggests to the Minister that we also review these 'interconnections'.
In February 2009, Gas Industry Co issued the Transmission Pipeline Interconnection Guidelines (the Guidelines). The Guidelines set out its view on the features of good interconnection practice.
The objectives of the Guidelines are to:
• describe what a TSO's interconnection policy should address;
• describe the phases of interconnection, what should happen in each phase, and the key decision points;
• establish principles that should apply to the overall provision of an interconnection service, and to each phase of interconnection;
• encourage TSOs to adopt consistent interconnection documentation;
• establish clear responsibilities; and
• minimise barriers to entry by promoting transparency and efficiency.
In September 2009, a review was conducted on the interconnection arrangements of both MDL and Vector against the Guidelines. As a result of the review and discussions held with the TSOs, some amendments to the Guidelines were considered necessary. These amendments and the reasons for them are noted in the table below.
Amendments to Guidelines on Interconnection with Transmission Pipelines
3.2 Interconnection Policy
Each TSO should publish an interconnection policy that includes:
'the TSO's general policies relating to interconnection matters;'
An overarching interconnection policy would provide greater clarity to an interconnecting party (IP). A policy would provide a clear process for both parties in respect of information requirements, timelines, and responsibilities. It would also provide the principles for issues such as the near-by existing interconnection points.
5.2 Equipment Responsibilities
The TSO and IP should agree the ownership and demarcation points of the interconnection equipment. In particular, they need to consider who will own TSO specified assets (noting that regardless of ownership, all TSO specified assetsshould be designed, constructed, operated, maintained and tested in accordance with the TSO's standards).
For a delivery interconnection point (see Figure 3):
· ownership of the equipment downstream of the primary isolation valve should be agreed between the parties. The TSO should not be obliged to own or provide this equipment. The TSO should give the IP an option to own this equipment permanently, or to transfer ownership to the TSO once constructed; and…
The objective of the Guidelines is to provide flexibility to an IP in respect of ownership and the means of cost recovery. By allowing an IP to own the station, it can choose how it funds the capital expenditure and be assured of a competitive cost.
As MDL does not fully address the requirements of a delivery interconnection, an interconnection policy should provide guidance in respect of delivery point interconnections. The delivery interconnection point is amended so that an interconnecting party (or a third party appointed by the IP) can construct the station and then transfer ownership to the TSO, enabling the IP a similar degree of financing flexibility.
Appendix A Documentation
An interconnection policy should include:
Relevant policies and standards:
h) general policies relating to interconnection matters, including:
I the use of existing interconnection points;
ii equipment ownership and ownership transfer; and
iii other relevant policy matters;
i) links to other policies and technical standards relevant to interconnection, including:
i pricing policy;
ii list of TSO-specified assets; and
iii technical standards;
Technical review principles:
l) a description of the process and principles that will be used to assess the technical acceptability of an interconnection application.
Neither has a specific interconnection policy; however, many aspects of the policy are addressed by each TSO in various documents. An overarching interconnection policy would provide greater clarity to an interconnecting party (IP). A policy would provide a clear process for both parties in respect of information requirements, timelines, and responsibilities.
Current review material
Notes that two interconnections to the Vector pipeline had occurred and been reviewed, but that significant interconnections to the Maui pipeline were not expected to occur until early in 2014. Gas Industry Co will provide the Minister with an update at that time.
Acknowledging progress and requesting Gas Industry Co to '…undertake a formal review of the current interconnection arrangements after the next two interconnections to each of the transmission pipelines, or by the end of 2013, whichever is sooner'.
Gas Industry Co has completed its review of transmission pipeline interconnection arrangements. Our advice to the Minister is that regulation is unnecessary at this stage. The TSOs have made efforts to improve their processes to align with the Guidelines and objectives of the Gas Act and GPS. Although we think dispute resolution processes can be improved further, we believe this can be achieved without regulation.
We propose that, once the TSOs' new arrangements are in place, Gas Industry Co will review how well they perform in practice by evaluating the next interconnections to the Vector and MDL pipelines. We will then make the appropriate recommendations.
2010 review material
Material from the 2010 review of TSO interconnection arrangements against the objectives of the Gas Act and GPS is presented below.
2009 review material
Material from the 2009 review of TSO interconnection arrangements against the Guidelines on Interconnection to Transmission Pipelines is presented below.