Retail Contracts

Overview

Owner: Susan Dunne
Status: Implementation


Introduction

In March 2010, following consultation, Gas Industry Co recommended to the Associate Minister that she endorse a voluntary scheme for assessing retail gas contracts against a set of benchmarks. The design of the Scheme was modelled on work previously carried out on retail model contracts, connections and disconnections, and assessing the performance of gas markets.


Summary of Status

Updated: 3 April 2014

On 3 April 2014 Gas Industry Co released its Summary of Submissions on the Statement of Proposal - Retail Gas Contracts Oversight Scheme Review. Five submissions were received and overall are supportive of the proposed changes. Gas Industry Co will now prepare its final advice to the Minister of Energy and Resources for delivery by the end of April.

Gas Industry Co completed detailed work in relation to re-designing the new Scheme. On 6 January 2014, Gas Industry Co released a Statement of Proposal summarising the analysis that has occurred, and the changes proposed to the Scheme.

Following implementation and in line with both the original recommendation and the improving trend of alignment over the three years of assessments, Gas Industry Co considers it is timely to renew the Scheme. On 18 June 2013, Gas Industry Co published the paper 'Retail Gas Contracts: Review of the Oversight Scheme', with submissions received by July 2013. Three submissions were received, and have been analysed in the paper 'Retail Gas Contracts: Review of the Oversight Scheme - Summary of Submissions'.

For any further information please contact Susan Dunne at susan.dunne[at]gasindustry.co[dot]nz

Background

Previously Consulted On

Statement of Proposal: Retail Gas Contracts Oversight Scheme Review

Date Published: 06 January 2014

On 13 June 2013, Gas Industry Co issued a paper Retail Gas Contracts: Review of Oversight Scheme setting out a number of options for the future direction of the Retail Gas Contracts Oversight Scheme (the Scheme). The paper noted that, subject to industry submissions on the options discussed, the Company would commence detailed work on re-designing the Scheme. Submissions supported amendments to the Scheme and this re-design work has now been completed.

The Statement of Proposal below summarises the analysis that has occurred, and the changes proposed to the Scheme.

Gas Industry Co welcomes submissions by Monday, 17 February 2014.

Submissions received

Retail Gas Contracts: Review of the Oversight Scheme

Date Published: 18 June 2013

The Retail Gas Contracts Oversight Scheme (the Scheme) was developed to assess retail gas contracts against a set of benchmarks developed by Gas Industry Co in conjunction with industry and consumer representatives. It was endorsed by the then Associate Minister of Energy and Resources in 2010. Gas Industry Co has implemented the Scheme and over the last three years has published an initial, transitional, and full assessment of gas retailers' contractual arrangements. In line with the original recommendation, and in response to the improving trend of alignment over the three years of assessments, Gas Industry Co considers it is timely to review the Scheme. The purpose of this document is to scope that review. The paper assesses the success of the Scheme, suggests possible changes for consultation with industry, and outlines Gas Industry Co's current thinking.

Gas Industry Co sought submissions on the review of the Scheme, and the issues set out in the document.

An analysis of submissions and Gas Industry Co's response to the submissions, was published on 29 August 2013. Based on the response, Gas Industry Co commenced detailed design work in relation to the new Scheme and released a Statement of Proposal for consultation found above.

Submissions received

Proposed design for the oversight of voluntary implementation of retail contract benchmarks

Date Published: 15 February 2010

The response and analysis of the submissions document published on 29 January 2010 foreshadowed the publication of a full proposed design for the oversight of the voluntary implementation of retail contract benchmarks. The design consultation document can be viewed below.

Following an industry workshop and discussion with other interested stakeholders, the design was finalised and presented to the Associate Minister of Energy and Resources for consideration of endorsement. Implementation is expected to be no later than mid 2010.

Options for the Governance of Retail Contract Terms - Consultation Paper

Date Published: 05 October 2009

Building on previous work on model contract guidelines and work done in conjunction with the Electricity Commission and the Electricity & Gas Complaints Commission, this paper presented a set of benchmark, or minimum, contract terms for governing domestic and small consumer gas supply arrangements. The two options are: voluntary adoption of the benchmark terms, or regulated implementation of the minimum terms.

Submissions received

Analysis of Submissions and Response to the Options for the Governance of Retail Contract Terms consultation paper dated 5 October 2009

Date Published: 04 October 2009

This paper provided an analysis of submissions on the retail contracts consultation paper referred to above, and the Gas Industry Co response to the submissions. The list of submitters is set out above. Input was also received from the Consumer Forum held on 16 October 2009.

Based on the response, a detailed design for Gas Industry Co oversight of the voluntary implementation of retail contract benchmarks was developed and published as a draft. The detailed design was discussed at an industry workshop in February 2010.

Response to Analysis of Submissions on the Consumer Issues Consultation paper dated 18 August 2008

In August 2008, a consultation paper was published inviting submissions on a range of current issues for domestic and small business gas consumers. Submissions were analysed and a response formulated that reached conclusions and set out the proposed next steps in key areas. The key areas are those of gas market and gas governance performance measurement, the provision of information to support consumer choices, dealing with connections and disconnections, and achieving appropriate retail contract terms and conditions. The response also included a final set of 18 proposed 'consumer expectations'.

Response to Analysis of Submissions on the Consumer Issues Consultation paper dated 18 August 2008

Discussion Paper - Current Issues for Domestic and Small Business Gas Consumers

Date Published: 13 August 2008

This discussion paper was a review of the approach to dealing with consumer issues in selected overseas jurisdictions and in New Zealand, and provided an account of the work to date by Gas Industry Co in this area. It adopted a principles-based approach to future work needs by establishing a set of consumer expectations, and analysing the shortfalls in meeting those expectations through current industry practice and gas governance arrangements. The analysis was based on a defined policy framework. The discussion paper set out conclusions on meeting these unsatisfied needs, and the extent to which the required work fell within the mandate of Gas Industry Co to action. The discussion paper particularly addressed the need for work on retail contractual terms and conditions. The discussion paper was released in both short (summary) and full form.

Submissions received

Options for Consumer Contract Arrangements

Date Published: 07 November 2005

The purpose of this consultation paper was to seek input from stakeholders on the Model Contracts Working Group's draft model contract guidelines, the options for giving effect to the guidelines from a governance and compliance perspective, and Gas Industry Co's recommended option.

Submissions received

Recommendation to the Associate Minister of Energy and Resources on the endorsement of arrangements for the oversight of gas retail contracts

At its 22 March 2010 meeting, the Board of Gas Industry Co agreed to submit a recommendation to the Associate Minister regarding retail contracts. The Recommendation sought endorsement for an industry-led arrangement of benchmark terms. The Recommendation was sent to the Minister on 29 March 2010. The Associate Minister's endorsement can be found here.

Recommendation

Implementation

In March 2010, Gas Industry Co submitted a recommendation to the Associate Minister of Energy and Resources that a retail contracts oversight scheme be established. On 12 May 2010, the Associate Minister advised her support for the retail contracts oversight scheme.

There, we set out the process for conducting the baseline assessment and provide information about the steps required by Gas Industry Co, the independent assessor, and retailers.

Assessment overview

Using a set of outcome-based benchmarks, developed in consultation with the industry, an independent assessor reviewed retail gas contracts to determine their alignment with industry best practice.

Gas Industry Co appointed Elwood Law Limited as the Independent Assessor. The principals of Elwood Law are lawyers who are skilled at interpreting contractual arrangements, and who have a great deal of experience with the gas industry. They are very conversant with the benchmark terms, having undertaken the contract assessment for the October 2009 consultation paper.

Baseline assessment

According to the recommendation, the first step in implementing this oversight scheme was to conduct a 'baseline assessment' of existing gas supply arrangements. The term 'gas supply arrangements' covers the published standard terms for gas retail supply contracts (whether residential or business), along with all ancillary documentation referenced in those contracts.

Individual retailers received the baseline assessment results for their own contractual arrangements and were given an opportunity to comment on draft reports before receiving final versions. None of the individual retailer reports were published by Gas Industry Co.

A consolidated report for the whole industry was submitted to the Associate Minister and published.

Subsequent assessments

An interim assessment took place in June 2010. Again, only the consolidated assessment for that review was published.

A link to this assessment can be found here.

For further information about the scheme or process, please contact Greig Hinds at Gas Industry Co:

Phone: 04 494 2466

E-mail: greig.hinds[at]gasindustry.co[dot]nz

Improvements made to the scheme

In March 2010, Gas Industry Co submitted a recommendation to the Associate Minister for a scheme to monitor retail gas contracts. The scheme assesses gas supply arrangements annually for their alignment with benchmark outcomes and objectives. The Associate Minister announced on 12 May that she had endorsed the retail gas contracts oversight scheme as recommended. Elwood Law was appointed as the Independent Assessor. The Assessor identified certain areas of concern where retail gas contracts were poorly aligned with the benchmarks. However, it was also found that, in practice, the gas retailers' operations appear to achieve the intent of the benchmarks. It was thus concluded that greater alignment could be achieved through better general descriptions of practice in the gas supply arrangements.

Retail Gas Contract Benchmarks - Restatement 2011

On 12 May 2010, the Associate Minister of Energy and Resources endorsed the oversight arrangements set out in Gas Industry Co's Recommendation to the Associate Minister of Energy and Resources on the endorsement of arrangements for the oversight of gas retail contracts dated March 2010 (the Recommendation). A "baseline review" of gas supply arrangements was undertaken as at 15 June 2010 (the Baseline Review). As part of that process, Gas Industry Co provided the Independent Assessor with guidance on how the retail contract terms benchmarks set out in the Recommendation should be interpreted.

Following the Baseline Review, the Independent Assessor and Gas Industry Co reviewed the process and determined that the Benchmarks, as originally consulted upon, would benefit from a reorganisation or 'restatement'. The restatement of the benchmarks contained in the below document does not substantially alter the benchmarks. Rather the benchmarks have been reordered and reframed, duplication and irrelevant statements have been removed, and clarity has been enhanced.

Retail Gas Contracts Benchmarks- Restatement 2011

For any queries please contact Greig Hinds at greig.hinds[at]gasindustry.co[dot]nz

Ongoing Assessment

Results: 2012 Assessment of Retail Gas Contracts

The third assessment of retail gas supply arrangements with small consumers under the Retail Contracts Assessment Scheme was conducted on contracts as at July 2012. The results for the first time included the assessment outcome for individual retailers, as well as at a consolidated level.

The Independent Assessor reported retailers' overall alignment with the Benchmarks in 2012 as 'Substantial', which was significantly improved from the consolidated ratings of 'Moderate' in each of the initial baseline assessment in 2010, and the subsequent transitional assessment in 2011.

Benchmark Assessment Report (2012)

News Release: Benchmarks bring major improvements in retail gas contract arrangements

Minister of Energy and Resources Media Release

2012 Assessment of Retail Gas Contracts Update

The following sets out the process and timing of the assessment.

  • On 16 March 2012 Gas Industry Co published minor amendments to the benchmark 9 and the interpretation of benchmark 16. See here
  • A number of retailers had indicated they were planning to amend their contractual terms before the 2012 assessment. The amendments were published by 1 July 2012 and included in the 2012 review.
  • The publication of the 2012 assessment reports and compliance results named each individual retailer and discussed each retailer's level of compliance against the benchmarks.
  • This year the process included the option of meeting with Elwood Law to discuss the draft assessment (in addition to the option of providing written feedback).
  • A finalised report was received in September 2012 and a copy was forwarded to the Minister of Energy and Resources in November 2012.


Minor Benchmark Amendments (March 2012)

Gas Industry Co has made amendments to Benchmarks 9 and 16. The link to the amendments can be found here.

Retail Gas Contracts Assessment 2012

Gas Industry Co is proposing an amendment to the interpretation of Benchmark 16.

The link to the proposal can be found here

Gas Industry Co also welcomes any comment on the revised interpretation of Benchmark 16. Please provide any comment to Jacki Eves at jacki.eves[at]gasindustry.co[dot]nz by Monday 30th January 2012. Following consideration of any comments, Gas Industry Co will publish the amended interpretation in February 2012.

Submissions

Mercury Energy

Retail Gas Contracts Assessment 2011

On 12 May 2010, the Associate Minister of Energy and Resources endorsed Gas Industry Co's recommendation that a retail contracts oversight scheme be established. As part of that scheme, a "baseline" assessment of gas supply arrangements as at 15 June 2010 was completed and published in August 2010.

A "transitional" assessment of arrangements at 1 July 2011 has been undertaken by an Independent Assessor, Elwood Law, to establish the degree of progress made by each retailer in aligning with the benchmarks since the baseline assessment. A consolidated report for the whole industry has been submitted to the Acting Minister and can be found here.

Letter to retailers on Transitional Assessment

Document list for 2011 Transitional Assessment report

The link to the Retail Gas Contracts benchmarks Restatement 2011 can be found here.